Many homebuyers, particularly those that are new to buying real estate,
fail to realize the importance of getting their finances in order before they begin to
shop for a home. In fact, shopping for a mortgage should be the first thing you do. Most
mortgage lenders offer a service called "pre-approval". They take your mortgage
application in advance of your purchase and approve you for a mortgage before you begin to
look for a home. There are several benefits to making your financial arrangements in
First of all, you'll have more time to shop around and compare mortgage options if you do
it in advance of purchasing. Typically, home sellers want to see you fulfill your
financing conditions within a one-week period of time. A new mortgage application can take
a week to work its way through the lender's system. If you wait until after you have an
accepted offer on a home, you'll be rushed and forced to accept what the first lender
If you get yourself pre-approved for a mortgage you'll be protected against interest rate
increases while you shop for a home. Most lenders will offer buyers their lowest interest
rate for 90 days from the time of application. If rates fall, you enjoy the benefits of
the lower rate. If they rise, you get the lower rate that the lender agreed to when they
processed your application.
Seeing your lender in advance will give you a clear picture of what you can afford to buy.
It's not unusual for lenders and buyers to disagree on this point, so it's best to know
exactly how much of a mortgage you qualify for. You'll avoid being disappointed after
you've found the perfect home only to find out that the bank won't approve your mortgage.
You won't waste time and energy looking at homes that are outside of the price range that
you can realistically finance.
A mortgage pre-approval will strengthen your position at the bargaining table. The fewer
conditions that you have to place on your offer to purchase, the more willing the seller
will likely be to negotiate the price and other terms. A buyer that does not have to make
an offer "subject to mortgage approval" is taken much more seriously than one
that hasn't made these arrangements.
In an active real estate market, buyers are often competing to buy good homes. In areas
where listing inventory is low, you can bet that the perfect home for you will also be the
perfect home for someone else. It's not the least bit unusual for sellers to receive more
than one offer at a time on the best properties. You can seriously improve your chances of
winning in these situations by having your mortgage arrangements made in advance. Having
your financing in place tells the seller that you're serious about purchasing the
property. It removes the uncertainty that is present with an offer that is "subject
to mortgage approval." It's even possible that a seller would accept a slightly lower
offer from you.