The mechanics of mortgage pre-approvals

Pre-approvals are an essential part of the home buying process, providing potential buyers with valuable information and advantages. Here are the mechanics of pre-approvals:

Purpose of pre-approval: pre-approval is a preliminary assessment by a lender to determine the maximum mortgage amount you can qualify for based on your financial situation, creditworthiness, and other relevant factors.

Benefits of a pre-approval:

Know your budget: pre-approval helps you understand the price range you can afford, narrowing down your home search to suitable options.

Rate lock: it ensures that your interest rate remains fixed for a specific period (in most cases the rate will be held for 120 days), protecting you from potential rate increases during that time.

Credibility: realtors and sellers view pre-approved buyers as serious and financially capable, giving you an advantage in this competitive market.

The process:

Application and documentation: you will need to complete a mortgage application and provide necessary documents such as proof of income, assets, employment history, credit score, and other financial details.

Caution

Financial stability: avoid significant changes to your financial situation after getting pre-approved. Lenders may re-evaluate your eligibility if they see negative changes, such as switching jobs, taking on new debts, missing payments, or co-signing loans for others.

Preserve down payment: make sure the money set aside for your down payment remains available. Using it for other purposes could affect your mortgage eligibility.

Be realistic: while pre-approval gives you a maximum loan amount, it doesn't mean you should borrow the full amount. Be realistic and consider your monthly budget, existing debts, and other homeownership expenses before finalizing your decision.

Remember, a pre-approval is not a final mortgage approval, and you will still need to go through the complete underwriting process after making an offer on a home. However, having a pre-approval can significantly streamline the home buying journey and give you confidence in your search. 

If you're interested in pursuing a pre-approval, contact us, and it will be our pleasure to get this done for you. Call or email us at Fred and Martin Mortgages. Best of all, it’s free and it could save you thousands. 

Fred and Martin