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Buying property: Why pre-approval is a good idea

Buying property: Why pre-approval is a good idea

luxury home

A mortgage pre-approval differs from a mortgage pre-qualification because during the pre-approval process, the lender checks a buyer’s credit and verifies their documentation to approve them for a specific loan amount.

Although obtaining pre-approval for a loan may not be a priority for some buyers in Illinois, there are several reasons why going through this process is a good idea.

Why is it important?

The preapproval process takes the risk out of property buyers finding the home that they wish to buy and then later discovering that they are denied for a home loan. It is also associated with the following advantages:

  • Affordability—Obtaining a letter of pre-approval from a lender allows those looking for a new home to understand their exact price limit. This ultimately saves buyers time because they can avoid looking at houses they know they cannot afford.
  • Motivation for the seller—Many sellers receive more than one offer for their home. When a seller is deciding which offer to pick, those buyers with pre-approval may be more likely to have their offer chosen.
  • Time savings—Since a lender has to go through all of the necessary steps to provide buyers with a loan during the pre-approval process, they can move the buying process along much faster once they find their desired home.
  • Awareness of additional costs—In some circumstances, buyers, especially those buying property for the first time, may not be fully aware of the extra costs, like closing costs, escrow fees and homeowner’s insurance, associated with acquiring a mortgage. When a lender provides a buyer with a list of itemized expenses after the pre-approval process has concluded, buyers will likely have a better understanding of the true cost of buying a home so that there are no surprises later on.

Additionally, having a pre-approval already in place allows those looking at homes to exhibit to sellers that they are serious about the purchasing process. This often provides buyers with greater power and influence during the negotiation process.

Required information

Before meeting with a lender for a mortgage pre-approval, those interested in looking at homes need to gather several pieces of crucial information to provide to their lender. For instance, buyers should come prepared with W-2 statements from the past two years, present bank account and investment account statements, employer verification and a copy of their driver’s license and Social Security card.

Prior to the pre-approval process, buyers should also consider meeting with an attorney. At this time, the attorney may be able to provide interested property buyers with more information about the purchasing process and the benefits of pre-approval.

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