Homeowners often lament the time it can take to close a mortgage, but there are ways to streamline the process. Knowing one’s credit report is a great way to be sure your application will be approved more quickly, but it does still require planning for that application processing time. Getting pre-approved, on the other hand, lets you skip the loan application processing at closing time by getting it out of the way early.
How Pre-Approval Works
Basically, when you get pre-approved, you apply for a loan ahead of finding the actual property you will purchase. Your bank processes the application as if there’s a property on the table with average features and in good repair at the price you’re getting pre-approved for. This allows them to get the income verification and other approval steps that are based on your financial health out of the way. Once you clear pre-approval, you can count on the loan being available as long as the property’s condition meets the standards set by your lending institution, and you are given information about those standards to guide you as you choose a property.
Advantages to Pre-Approval
On top of the ability to shop like a cash buyer and close almost as quickly, pre-approval brings a few other advantages while home shopping.
- Realtors are more willing to show properties that just hit the market
- High-demand properties are easier to close on, increasing your competitiveness
- Often a faster closing will win a bid without having to increase your offer
- Owners who are selling their properties themselves like working with cash offers and pre-approved buyers
- Help yourself set your standards for home condition and size
- Understand your buying capacity better and shop to suit your current needs and resources
In today’s competitive real estate market, there simply aren’t any good reasons not to get pre-approved. It comes with tons of advantages and no real disadvantages, since you’ll have to provide all the same information to a lender before you close anyhow.