In reality, finding a lender first and getting pre-approved ahead of going home shopping will not only let you know how much of a home you can afford but also make you a more attractive to home-sellers, especially in a competitive real estate market.
How do you get a Pre-Approval for Mortgage?
The first step will be to complete a mortgage application and submit the necessary documentation to the lender. This can often be done online, at your convenience. The bank or lender will then look at your financial situation, including credit, income and assets. Based on all of this information, the bank or lender will determine the mortgage amount you qualify for. While a pre-approval is an important first step, it is not the final mortgage approval.
One of the major advantages of having a pre-approval is that this letter can be shown to real estate agents as well as home-sellers when shopping for a new house or apartment. By doing so, both the agent and the seller know that you can qualify for a certain mortgage amount and are able to buy the property, which makes you a more attractive buyer.
During the pre-approval process, the lender will also discuss the most appropriate type of mortgage that fits your needs, whether it is a conventional loan or a portfolio loan.
Knowing how much you can afford and being pre-approved can greatly increase the odds of having your offer be accepted and ultimately it makes looking for a new home, less stressful. Once you find a home and the sales contract is signed, processing the loan is faster since some of the work for the credit file has already been completed.