4 Benefits of Mortgage Preapproval for First-Time Home Buyers
If you've read any articles at all about buying your first home, you've probably heard that you
should seek mortgage preapproval as you tour potential properties. Preapproval consists of a letter from the mortgage company indicating the amount available for your potential home loan based on your credit history, the interest rate and the monthly payment. If you make an offer on a home and decide to move forward with that mortgage company, the lender will confirm your credit and employment history as part of the underwriting process before finalizing the home loan.
Review the benefits of having a preapproval letter in hand during the complex but ultimately deeply rewarding process of purchasing a home as a first-time buyer.
Develop a Realistic Budget
Your credit has a significant influence on the available interest rate for a mortgage, which in turn affects your monthly payment. When you receive a preapproval letter, you will have a better understanding of the total cost associated with a mortgage from that lender. With that information in hand, you can shop only for homes that fit squarely within your budget to avoid either purchasing more than you can afford or getting stuck with a fixer-upper you don't love. Because creating a budget can be daunting, preapproval is a key tool for first-time homebuyers who are new to the real estate market.
Develop a Realistic Budget
Your credit has a significant influence on the available interest rate for a mortgage, which in turn affects your monthly payment. When you receive a preapproval letter, you will have a better understanding of the total cost associated with a mortgage from that lender. With that information in hand, you can shop only for homes that fit squarely within your budget to avoid either purchasing more than you can afford or getting stuck with a fixer-upper you don't love. Because creating a budget can be daunting, preapproval is a key tool for first-time homebuyers who are new to the real estate market.
Obtain the Best Available Rate
Just as with other major purchases, you'll want to shop around for the best rates for your home. For this reason, it's valuable to seek preapproval for more than one mortgage lender so you can find the most advantageous interest rate and terms for which you qualify. If you complete all preapproval applications within 45 days, these inquiries will count as one hard credit pull rather than as multiple inquiries that could lower your score.
Become a Competitive Buyer
Many U.S. real estate markets are still quite competitive, with affordable, desirable homes
snapped up as quickly as they enter the market. While buyers in most areas can still choose from a fair amount of inventory, you may end up in a bidding war with another buyer. Your preapproval letter shows sellers that you're serious about purchasing a home and that you have the means to follow through with the purchase after making an offer. Without this document, you may get passed over for a home you really love in favor of a buyer with his or her financials in place.
5. Comparison Shop
If you find something that you want when out, do not immediately purchase it. Instead, go home and research the item. Look for other sellers or coupons. Comparison shop. By restricting the impulse for immediate satisfaction, you can save yourself a bunch of money. Remember, retirement is supposed to be slow and easy; there is no reason to rush.
Avoiding debt does not have to be complicated. With careful planning and an understanding of your financial obligations, you can easily maintain a debt-free retirement. If you want more
financial and retirement advice, continue reading the Wise Ol' Crow.