Question:
When should I get pre-approved for a mortgage and what does it mean?
Answer:
To be pre-approved means that you have met with a mortgage professional and they have received and reviewed your qualifying documents (last 2 years tax returns, your last 60 days of all bank statements, and last 30 days of pay stubs) and have approved you for a mortgage based on your credit score, the Debt to Income ratio (DTI), employment history, loan type, down-payment amount, estimated mortgage rate, and estimated taxes.
Ideally, you should be pre-approved for a mortgage before looking at houses. In fact, there are several reasons why a buyer should be pre-approved before looking at homes. For one, after you are pre-approved you will be able to know if you are qualified to purchase a home, it you will be able to look in the right price range (not too low or too high). Secondly, it can take some time to pull together the necessary documents and to review them, so if you find the home of your dreams before you're pre-approved, you might lose out to another buyer who was already pre-approved while you were still gathering your paperwork. Another reason why it's important to be pre-approved before looking at houses is because if you decide that an FHA loan is the right answer for you, it's important you know that up front because it may limit the homes you might consider because of the home quality/condition requirements that come with an FHA loan.
Looking at homes without being pre-approved is a lot like shopping for car before you have a driver's license. You can find a car that you might like, but you can't do anything about it until you can drive. And who wants to look at homes unless you can actually buy?
Having a pre-approval puts you in a position of confidence that you can make an offer when the time is right. Contact me anytime for more information on this or for information on any housing topic!
