Why You Need a Pre-Approval BEFORE Looking at Homes to Buy

If you’re fresh to the home buying process (or if you just haven’t done it in a while), it probably feels like you’re being bombarded with a slew of new terminology…escrow, comparables, appraisals, oh my!

Don’t worry, your agent will do most of the heavy lifting on those ones. But one thing you’ll have to get cozy with when you’re beginning your home search and planning to take out a mortgage, is the pre-approval letter.

What is a pre-approval letter?

Simply put, it’s a document you receive from a lender that states how much they’re willing to loan you for a specific timeframe.

When you engage a buyer’s agent to start your search, they will most likely ask if you have one of these letters. Why? Because it shows that you know how much home you can afford and that you’re serious about buying. It also shows that you’ve gone through the process of getting pre-qualified by a bank and someone has checked out your finances and credit on a basic level. The seller wants to know that anyone walking through the door has the right buying power to submit an offer, so listing agents will often require the pre-approval letter before scheduling showings.

Here are some fast facts about pre-approval letters:

• They’re based on your key financial information including income, debt-to-income ratio, and credit score. 
• The lender will pull your credit for the pre-approval, but it’s a soft pull that won’t impact your score.
• They’re not a guaranteed loan offer as they’re not underwritten. But they provide parameters to allow prospective buyers to conduct their home search with an accurate budget.
• They are conditional. If your financial situation changes during the home buying process, it can change the terms of the pre-approval. 
• Time limits on the pre-approval can vary but most are good for 90 days.

They say knowledge is power and the pre-approval letter is what you need to feel confident that you’re looking for a home that fits your budget. To top it all off, your agent can pair you with their trusted loan partners to help alleviate the pressure.

Thinking of starting your home search in The Bronx?

Reach out to Danielle Amico with the Aaron & Geoff Team at Compass.