Not Getting Pre-Approved for a Mortgage Hurts You Many Ways
When you're preparing to buy a home, there will be a long list of things you need to do. It might be tempting to skip a few of these things for the sake of convenience or time constraints. However, not getting yourself pre-approved for a mortgage could be harmful to your chances of getting the home you want. Here are some ways that failing to get a pre-approval from a mortgage lender hurts your prospects of becoming a homeowner and having a smooth transaction.
Plan Your Monthly Budget
When you go through the pre-approval process, the lender looks closely at your finances. This allows you to know how much you can afford for a mortgage payment. Your banker will explain how much you should allocate for the mortgage, interest, taxes, and insurance on a home.
Get More Consideration From Sellers
It's still a seller's market in most areas of the United States. When multiple people place a bid on a home, the sellers will look at the offer price and how the buyer will pay. A seller might prioritize a cash offer first. Those are rare, so the seller will next look for offers that include a lender's letter of pre-approval. The seller wants to know the buyer won't have to back out because of no financing.
Power in Negotiations
A letter of pre-approval gives you more room to negotiate with the seller. Since the seller doesn't have to worry about your financing falling through, they may offer you more flexibility about the date you can gain possession of the home. They may allow you to pick the closing date. You may even be able to negotiate a lower price when you show that you have the financing to complete the transaction.
Reduce the Stress of Home Buying
When you've found a home you love and can't wait to move in, a lack of assurance on the financing could cause you a lot of stress. It's better to have the financing in place before you go looking for a home. If your financing were to fall through, you could end up losing your earnest or deposit money, the fees you pay for home inspections, and fees for appraisals. Get pre-approved before you start seriously searching for a home.
Faster Closing Process
Real estate transactions usually require a few weeks for the closing process. There are many steps in the process, and everything has to fall in place. If you're not pre-approved by a lender, having to wait for a lender to review your application, check your credit and underwrite your loan could throw a wrench into the process. You might end up missing out on a key interest rate. If you're renting, you could have to make arrangements to extend your lease. If you're selling your current home, waiting on loan approval could throw off your timeline for that transaction.