Let's start out with What A Pre-approval letter Is. It is a letter from your mortgage lender that states you are qualified for a specific amount of a loan.
There is nothing more heart breaking than falling in love with a home and then realizing it is out of your reach financially. It also may also help secure the home you love above competitors that weren't pre-approved and in a competitive market, every advantage helps.
Be knowledgeable though, there is a difference between pre-qualification and pre-approval.
Pre-qualification means that you provide some general information about your income and debt to a broker or lender. It is more of a general outline of your finances.
There is very little or sometimes no confirmation that the information you provided is fact. A pre-qualification can give you a general idea of a price range and mortgage payments you may be looking at, but it carries very little weight when it comes to negotiating for a home.
Pre-approval is also provided by your broker or lender, but the information must be verified.
You will be asked by your lender for documentation about your income, your down payment, credit cards and any outstanding loans.
Saving time is one of the great advantages of being pre-approved. If the seller is in a hurry to move or has already moved, or it's a hot real estate market, your offer will look attractive because you will be able to close the deal much faster. Most often arranging a loan is one the most time consuming steps in the process of buying a home. With the loan pre-approval already arranged, that will be one less condition of sale that will take valuable time.
This letter is time-sensitive and normally will expire within 60-90 days (a 90 day period is most common and the best to acquire).
It's good to know that you should complete the entire transaction of buying a home within the pre-approval time frame if interest rates look like they may be rising. For example, the interest rates are 2.5% on the day of pre-approval, 3.0% on the application date and 3.3% on the funding date, you would receive your mortgage at 2.5%. This could have a big impact on your finances depending on the amount of your loan and how fast you can pay off your new home.
To conclude: A pre-approval is a great benefit to you, the home buyer: it will save time, disappointment, and money!!
Call Irene Bilinski to find out more about buying a home, it's important to be as prepared as you can, especially when the real estate market is a hot one.
Direct: 613-858.1151 Call or Text me Today!!
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RE/MAX Hallmark Realty Group in Ottawa
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