If you are beginning the long process of purchasing your first home in the Greater Boston Area, before you start your search for the perfect house, get pre-approved for a mortgage loan from a good lender. While the pre-approval process may seem like an extra step you don’t really need, it’s a good step to take, as it shows you how much you can truly afford and allows you to purchase the house of your dreams faster.
What Is Mortgage Loan Pre-Approval?A loan has been pre-approved when a mortgage lender has:
- Checked your application completely,
- Verified and approved all financial information you have provided, and
- Allocated a certain amount of money to you through a specific type of loan.
Advantages of Mortgage Loan Pre-Approval in the Greater Boston Area
Major advantages of getting pre-approved for a mortgage loan include:
- The Answer to the Question, “How Much Can I Afford?”: By getting pre-approved, you will know exactly the amount of money to which you are entitled because of your current finances. This will act as a reality check and allow you to find a house that fits into your budget. That is, it will automatically remove houses higher than the amount you have been pre-approved for, and it saves you time and effort looking for houses you can’t really afford.
- Negotiating Power: Sellers of houses like buyers who are serious, meaning buyers who have money ready to close the deal. By getting pre-approved, you will be showing a potential seller that you are indeed a serious purchaser. This will, in turn, provide you with a platform to negotiate in order to get the best price possible. This works because most sellers are keen on selling fast, and by showing that you are serious, they will often be ready to sell for a lower price than initially quoted.
The Difference Between “Pre-Qualified” and “Pre-Approved”
There exists a confusion between mortgage loan pre-qualification and mortgage loan pre-approval. These terms, while sounding similar, mean two very different things. A mortgage loan is said to be pre-qualified when the lender does not verify your financial information but merely provides you with a rough guess as to how much you might be entitled to borrow. Here, the lender has not approved the amount and has no legal obligation to actually provide you with the stated amount. You may find that the true amount of money you can borrow (calculated after your financial information is verified) is very different from the initially quoted amount.
Having a mortgage loan pre-approved, on the other hand, means that the lender has verified and already approved your loan application. A certain amount of money has been allocated to your name through a specific type of mortgage loan, and the interest rates and other aspects of the loan such as term of repayment have been finalized.
So make sure to get your mortgage loan pre-approved before you start the search for the perfect house. This simple initial step will make the long and complex process a bit smoother.
Lender Tip: Contact us to get pre-approved for a mortgage loan in the Greater Boston Area.