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The perks of pre-approving your mortgage loan By Melissa Wirkus

Buying a home and taking out a mortgage are two milestones in life that require a lot of planning and a huge commitment. Before you even start looking for your home, you should decide how much you want to spend and how you are going to finance this big purchase.

Contrary to popular belief, not everyone who applies for a mortgage is accepted. During the application process, your finances, credit score and work history are all analyzed to determine your credibility of paying the loan back over time.

Getting pre-approved for your loan in advance is one of the smartest things a potential homebuyer can do because it gives them many advantages in this long and often-times confusing process.

An article by Elizabeth Weintraub of about.com, “The advantages of loan pre-approval,” explains why getting a pre-approval has many rewards.

As you begin the mortgage process, you will probably hear the word pre-qualification come up as well as pre-approval – but they are not the same thing.

A pre-qualification is not as valuable as the pre-approval because it just takes a general look at your income and financial situation and plugs it into a debt-to-income ratio, giving you a general idea of the mortgage you would be able to afford.

The pre-approval is much different in that the lender will take a very close look at your financial situation and actually determine that you qualify for a loan. They will tell you the maximum amount they will loan you and the types of mortgages you are eligible for.

This is extremely valuable for homebuyers because they now know what price range they can afford and will not waste their time on touring homes that are much too expensive for the loan they qualify for.

“Now when you find that perfect home, nobody can take it away from you by telling you that you do not qualify to buy it. You can minimize anxiety and remove last-minute loan surprises that could disqualify you. You'll sleep better at night knowing that the home you selected is yours. Moreover, you can tell your relatives and friends that the home you made an offer is definitely going to close and you will not ‘lose face’ with anybody.”

Another advantage to a pre-approval is that the seller is much more likely to immediately accept your offer because you have the safety net of a pre-approval letter. Even if you are offering less than the listing price, they are more apt to accept it because you are a credible and trustworthy buyer, not one who will make an offer on the house only to be denied an adequate mortgage loan.

You will also experience faster closing period as a result of being pre-approved for your loan.

“Because there is no window period while your loan application is processed, the lender can speed up the entire processing procedure. Appraisals can be ordered immediately. It's possible to shorten a 30-day closing to two or three weeks, which comes in handy if a seller needs to quickly move and can't decide which offer to accept. Yours will move to the front if you can accomplish the seller's need to quickly close.”

A pre-approval often takes a long time to complete, so it is suggested that as soon as you are ready to begin your house hunt, you start the loan application process to get pre-approved.

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