Loan Pre-Approval Process
How Much Home Can You Buy?
Although it is early on in your plans to purchase, it is likely that you have wondered how much home you will be able to buy. The best way to find out is to contact a lender. Pre-approval means getting approved for your mortgage in advance. Don’t confuse this with pre-qualification. Pre approval is where you actually apply for the loan and get approved by a lender for a specific amount of money, and a specific loan to value ratio.
The loan to value ratio is the percentage of the loan amount in relation to the value of the home. The difference is your down payment. Now when you find your dream home, you only need an appraisal and you can close on your home in as little as two weeks! This is a very valuable buying tool. It gives you the negotiating power of a cash buyer. However, neither a pre-approval or a pre-qualification means you are guaranteed a mortgage.
Lenders still need to look at property appraisals, verify information, and, in many cases, re-check credit before agreeing to make a loan. Still, it’s worthwhile to obtain pre-approval at the beginning of the buying process to know how much home you can afford and to avoid the headaches and embarrassments of not qualifying for a home you have under contract.