Serious home buyers know that getting a pre-approval from a mortgage lender is the first important step before they go out to the market and look for their dream homes. Pre-approval helps homebuyers determine the amount they could borrow to buy a home. Most sellers accept offers from homebuyers who have already been pre-approved by a mortgage lender.
You may already understand that a pre-approval is way better than a pre-qualification. With a pre-approval, a lender could already offer you to borrow up to a certain amount upon verification of your finances and credit, while a pre-qualification is just a rough estimate whether you could qualify to take out a mortgage or not.
If you’re planning to get a mortgage pre-approval, there are important things that you need to know once you obtain a pre-approval.
Your credit score remains the same, even if you get pre-approval from multiple lenders
Experts will advise you to get a pre-approval from several lenders for good reasons: it will not hurt your credit score and you could get the most competitive rate. The best time to get a pre-approval is before you start looking for homes or submitting an offer. Although lenders will pull out your credit history and make a “hard inquiry”, it will not affect your credit score because you’re just shopping for a more beneficial mortgage interest rate. Hard inquiries could hurt your credit only if they are a result of your trying to open multiple credit cards in a short time. Credit scoring company, FICO even recommends homebuyers to get a pre-approval from multiple lenders within 30 days to secure a better rate.
On average, you could save hundreds of dollars in interest if you could compare pre-approvals from at least five mortgage lenders.
It is possible to secure a mortgage rate in a pre-approval
If you think that mortgage interest rates could increase in a short span of time, it may be a good idea to lock your rate in a pre-approval. This means, if you’ll be approved for a loan, the interest rate you’ll get is, unless certain circumstances or conditions change or occur, the one you’ve been pre-approved for. When you opt to lock in your rate in a pre-approval, lenders would require you to put a deposit. Depending on the lender, rate lock deposits could go around 1 percent of the cost of the home you intend to buy. Be reminded that if you’re going to lock your rate, find out if you can get your deposit back if you later decide not to pursue the purchase.
Pre-approvals could expire
Because mortgage interest rates frequently change, and your financial situation could also change, it makes sense for lenders to put an expiration date in every pre-approval they issue to prospective borrowers. The expiration of pre-approvals could last between 30 to 90 days depending on the guidelines set by the lender. When obtaining a pre-approval, you may find it ideal to ask for the policies once your pre-approval expires. Once expired, lenders could renew your pre-approval with no changes if the new documents you’ll submit proves that your finances and credit remain the same.
A pre-approval does not guarantee that you can take out a mortgage
When you get a mortgage pre-approval, it’s important to keep in mind that you’re neither approved nor denied taking out a mortgage. At this point, you cannot guarantee yet that a lender will provide you financing to buy a home. When you’re ready to move forward, the lender wants to ensure that your credit and finances remain the same or have further improved when you take out a loan. Moreover, the lender also wants to find out if the home that you’re buying could secure the loan you will take, that’s why a home appraisal is often a requirement. Your lender will order a home appraisal to determine if the value of the property that you’re about to buy is the same or exceeds the amount of the loan which is better.
There are mistakes that you need to avoid once you get a pre-approval
Lenders could offer you to borrow up to a certain amount because they’ve verified the documents you’ve submitted. During this time that you’ve been pre-approved, you need to make sure that your credit and finances are intact, or if there would be changes, it should be in a positive way. Applying for a new credit card and taking out a car loan could greatly hurt your good credit standing, a move that would make you no longer approved for the loan initially offered to you. Other mistakes that you need to avoid include failure to pay your bills on time, co-signing loans, ignoring requests from lenders, and closing a credit card account. If you’re going to accept a job with a better offer, make sure you consult your lender for additional requirements to prove your new employment and salary. Once you’ve been pre-approved, it’s a smart move to always consult your lender before you do anything that could possibly affect your credit and finances.
Speak with an RPM loan advisor if you want to get a pre-approval
Getting a mortgage pre-approval is the first step you need to take if you’re a serious homebuyer. A pre-approval could increase your chances of having your offer accepted because home sellers are aware that lenders have already verified that you could borrow up to a certain amount to buy a home.
Get in touch with a professional RPM loan advisor today to get a mortgage pre-approval and start your homebuying journey.