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Consider
a Mortgage Pre-Approval |
You've spent a lot of time imagining
your dream home. Now imagine this:
You've found the perfect neighborhood, the cutest little house
with the greatest backyard, and you think you can even afford
it. It has everything you ever wanted. You've spent a couple
hundred hours finding your little treasure, you've spent a
couple hundred dollars on fees and property inspections, and
you have scrunched up your courage to make an offer. Your
heart is so set on it that you've even started telling your
friends your new address.
And then the bank calls.
Your mortgage application has been denied.
Arrrghhh!
How could you have saved yourself from this heartache? With
a pre-approval for a mortgage. In fact, we Fools heartily
recommend you get one before you go any further in the home-finding
process.
What is pre-approval? It's basically a quick-and-dirty look
from a lending institution at your creditworthiness. With
a pre-approval or pre-qualification letter in your hand, you're
immediately in a stronger negotiating position with any seller.
There are two types of "pre" letters:
Pre-qualification
is an informal agreement between you and your lender. The
bank gives its opinion on how much they think they will be
able to lend to you based on information that you have provided
to them. Your bank doesn't do any background checks at this
point. It relies solely on you portraying an accurate picture
of your circumstances. Because this is more like a friendly
handshake, the lender can decide not to give you the loan
if they find out later that you have been less than candid
with them. There is no charge to do this and you are under
no obligation to get a mortgage with this lender if you find
a better deal later.
Pre-approval
is more serious. The bank will actually check your credit
history, employment information, assets, and liabilities.
The only thing they won't check is the property that you plan
to buy, because, of course, you haven't found it yet! If you're
concerned that you might not qualify for a mortgage, we highly
recommend that you go for pre-approval. It will put your mind
at ease while you search for your new home and make the entire
experience much less worrisome. Some lenders charge for a
pre-approval. If you decide to go with one who charges for
this service, make sure you're really going to buy a house
soon or you'll just be throwing money away.
Check out our Foolish calculators to find out how much you
can borrow and how much your payments will be. It's very Foolish
to know what to expect. |
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