Mortgages are needed by many buyers at the time they choose to purchase a property. However, starting the mortgage process before you even find the home you want to buy can be very beneficial. Here are just a few of the reasons why pre-qualifying early can make a big difference.
- First and foremost, talking to a couple lenders and going over your financial information before you search for a home can help give you and your broker a better idea of home much home you qualify to purchase and what type of payment you are comfortable with. Note: just because you qualify for $300,000 doesn’t mean you have to spend it. If you’re more comfortable with the monthly payments that go along with a $225,000 purchase, stay in that range. What you qualify for does not have to be what you spend. Think of your overall goals, your comfort level with financial risk, and consider ways in which your life or finances may fluctuate in the coming years.
- Another reason to get a head start on digging up your financial documents and discussing things with a professional is that it will give you time to make changes or improve your scenario, so long as you’re looking into it in advance. If you wait to talk to a mortgage broker until you have found the home you want, you’re basically stuck with the rates, terms and options that you get. If you’re researching in advance, you may have time to improve your situation to receive better terms when it comes time to buy.
- A third reason to talk to a pro sooner is that you’re going to have to talk to someone anyway so why not do it now? You’re going to have to dig up the required documents anyway, so why not look for them now, when you have time, rather than later… when you’ve found the house you love and are rushing to find the documents to give to the lender… so you can get your offer accepted… before someone else buys the house before you!
- A final reason to talk to a lender early is to actually get pre-approved. This means having the lender review all your information and provide you with a letter stating the extent to which they would be comfortable loaning you funds. The pre-approval letter is usually dated and “good” for a period of time (60-90 days) and notes the dollar amount you qualify to borrow (or less) towards a home purchase. This proof of approval, when provided to Sellers alongside your offer, can really set you apart from other buyers. In a situation where there may be multiple buyers competing for the same home, or in a busy market where a Seller would be hesitant to shift their property from Active to Under Contract for an “iffy” buyer, the pre-approval letter can be a valuable asset.
What does this all boil down to? Lending is important. The rates and terms of your loan can make even more of a difference on the affordability of your home than the price of the home itself. Often, people get caught up on if home prices are up or down, if a particular house is priced too high, if they can negotiate the list price down a certain amount to an acceptable level to them. All of these variables surrounding home prices play a part in affordability but your loan terms are equally important and often more important. However, they seldom get the attention they deserve. Why? Probably because looking at homes and following home prices online is more fun than looking at your financial paperwork and actively working to improve your financial situation. But remember, a little bit of advance preparation can go a long way.
Talk to a lender today about getting pre-approved for your future purchase! For a few suggestions of great local mortgage brokers to talk to, call/email me anytime! (970) 333-3593 or [email protected]