When your parents bought their house, it is likely that getting approved for the home loan was one of the last steps in the process. They searched, they found the home of their dreams (or the home of their budget), they made an offer, and then they applied for the loan.
Today, in many cases, and in particular for first home buyers, the process is a bit different. Most residential buyers get pre-approved for a loan prior to searching in earnest.
Loan pre-approval means that a lender will review your financial documentation and pre-approve a loan up to a given amount, based primarily on your assets, expenses, and income. A few caveats are in order here. Being pre-approved for a particular size of loan does not guarantee that you will receive that loan amount. Once you have completed your search, you’ll need to get your loan finalized. This is usually a perfunctory process that takes from a few hours to a few days and hinges on the valuation of the property you wish to purchase. In most instances, you won’t be able to borrow more than 80% of the selling price, and the lender will want to confirm that you are paying an appropriate price for the property.
Advantages of Loan Pre-approval
Pre-approval comes with a number of advantages in the home purchasing process:
- You’ll have a realistic understanding of your maximum purchase price,
- You’ll have an advantage over non-pre-approved buyers when negotiating a purchase price,
- You’ll often be able to move through the purchase process quicker, without waiting for the initial review of loan documents, and
- You’ll signal to your real estate agent your intention to buy, increasing her or his investment in your home search.
At Priority Lending we can play an essential role in the pre-approval process. We can help you to identify and select a lender likely to provide the most favorable rates and then assist you in stepping through the pre-approval process efficiently and effectively.