Is It Beneficial To Have A Pre-Approval Letter When Placing An Offer?
Is it beneficial to have a pre-approval letter for financing when putting an offer on a property?
Yes, definitely! A pre-approval is when a potential mortgage lender looks at your finances to find out the maximum amount they will lend you and what interest rate they will charge you.
With a pre-approval, you can:
- know the maximum amount of a mortgage you could qualify for
- estimate your mortgage payments
- lock in an interest rate for a certain period of time
After all, how can you shop for property when you don’t know how much money you have to spend or, more importantly, how much a lender will loan you for your mortgage?
There are a number of reasons why you’d want to get pre-approved. For starters, it’ll speed up the home buying process. A file has already been opened for you with your lender, and you’ll be providing additional information to what’s already there. It will also give you a much more accurate assessment of the amount of money that you’ll have at your disposal for your property purchase. A pre-approval will show to your realtor that you’re serious about buying a home, and it will do the same to sellers, which means that the offer that you end up presenting may be stronger than a buyer’s offer without a pre-approval. To a seller, a pre-approval means that your financing is less likely to fall through than it would be without a pre-approval, and in a strong real estate market, every advantage helps.
Remember, the amount for which you’re pre-approved is not guaranteed. The only thing that’s locked in is the interest rate. This not only gives you another tool to better estimate monthly costs, but it also protects you against rising interest rates in the near future. If rates rise during the period in which the pre-approval rate is valid, then you will be given the rate that was guaranteed for the pre-approval. If rates fall, don’t worry – you will be given the lowest rate available. And even though it’s a good idea of the size of mortgage a lender will approve, it doesn’t mean that you should look for a property with the price tag that matches the number you’ve been given.
If you have any questions about the pre-approval process or if you’d like to start this process today, let us know! We would be happy to guide you through this process.