Many buyers take what has now become a necessary part of the home-buying process in stride. A pre-approval provides you with what you need to know before you begin wasting time on homes that you cannot possibly afford. Some buyers, though, find it difficult to find a home they want within the price range that the pre-approval covers. What to do? Read on.
Your Pre-approval Provides Valuable Guidance
While you may need to provide a lot more verification with a mortgage application, a pre-approval is surprisingly thorough when it comes to evaluating your buying abilities. Your credit is checked along with your income and debts. That produces a price range from which buyers can work. Pre-approval letters can make you look better to sellers who want to deal with qualified buyers but it's not everything. For one thing, a pre-approval is not a guarantee of financing.
Things Can Change, Though
Credit is seldom a static thing. Your score can be affected by everything, from balances on credit cards to inquiries from potential creditors. That means a pre-approval is only good for a limited amount of time. The changing nature of a credit situation can be both a problem and a benefit for home buyers. If the applicant's score drops before they can be approved for a mortgage, the pre-approval may mean little to nothing for the buyer even if they stuck to the suggested price range. On the other hand, buyers in the process of improving their scores might qualify for more than the approved range and score a nicer home at a lower interest rate.
Have Cash Ready
Buyers not only need cash on hand to pay for closing costs, home inspections, and appraisals, but they also might want to cushion their nest egg with cash for issues with their pre-approval. Cash, when used as a down payment, can allow buyers to achieve financing for their dream home when their credit takes an unexpected turn for the worst.
Can You Get More?
Not only do credit scores go up and down, so do other real estate functions. Interest rates can rise and fall, and so can home prices. All of that can create either the perfect storm of assured mortgage approval or disaster for any hopes of buying a home. If you have found the home you want but it's out of your range, apply for the mortgage if your credit has improved since the pre-approval or if interest rates have fallen.
Speak to a lending company, such as Fairway PNW, to find out more about mortgage pre-approval.