Getting pre-approved for a mortgage is the first step of the home buying
process. Getting a pre-approval letter from a lender get the ball rolling in
the right direction.
Here’s why:
First, you need to know how much you can borrow. Knowing how much home you
can afford narrows down online home searching to suitable properties, thus
no time is wasted considering homes that are not within your budget.
(Pre-approvals also help prevent disappointment caused by falling in love
unaffordable homes.)
Second, the loan estimate from your lender will show how much money is
required for the down payment and closing costs. You may need more time to
save up money, liquidate other assets or seek mortgage gift funds from
family. In any case, you will have a clear picture of what is financially
required.
Finally, being pre-approved for a mortgage demonstrates that you are a
serious buyer to both your real estate agent and the person selling their
home.
Most real estate agents will require a pre-approval before showing homes -
this is especially true at the higher end of the real estate market; sellers
of luxury homes will only allow pre-screened (and verified) buyers to view
their homes. This is meant to keep out "Looky Lous" and protect the seller’s
privacy. What’s more, by limiting who enters their home, sellers are given
extra security from potential thieves trying to case the home (like
identifying security systems, locating expensive artwork or other high-value
personal property).