As you start searching for a home, one piece of advice you may hear is to get pre-approved for a mortgage. You may have a couple questions about this step before you move forward with doing it.
Why Is a Pre-Approval Letter Important?
Unless you have enough cash on hand to pay for your entire home, you'll need financing in order to cover the costs. Seller do take your financing into consideration when they decide on who they are going to sell a home to. For instance, if they are eager to sell a home, they may select a buyer that has an all cash offer just so they do not need to wait for the mortgage approval process to play out.
A mortgage pre-approval letter is what you can give to the seller to let them know you have been approved by a lender for a mortgage. It lets them know how much you are capable of borrowing, as well as any conditions that may be placed on the loan in order for it to be approved.
Lender conditions may include the home needing to pass a home inspection, or to be apprised at a certain value. Conditions can also include financial requirements, such as the buyer needing to supply a large down payment. These conditions let a seller know what potential problem the buyer can run into, which can help them decide between multiple offers.
Does a Pre-Approval Letter Expire?
A pre-approval letter is not valid indefinitely. In fact, there is often an expiration date associated with the offer. While it is easy to have a pre-approval letter extended, there are many reasons that the expiration date exists.
The main concern is if there has been a change in financial status since the pre-approval letter was issued. The buyer may have decided to take on more debt with an auto loan, or lost their job and had a reduction in monthly income. These kind of things can affect how much a bank will approve a seller for, so the financial status of a buyer is evaluated against after the letter expires.
The goal is to help sellers know that the offer for a mortgage will still be valid by the time that the closing date on the home arrives. If the mortgage falls through, it ultimately costs both parties money and time that cannot be made back.
Speak with a realtor for more information about mortgage pre-approval letters.
After thinking long and hard about what to do with my living situation, I finally made the decision that it was time to buy a house. I was tired of living paycheck to paycheck because of rent, so I began working with professionals to guide me in the right financial direction. I was able to find a great company that offered exactly what I wanted to learn, and they walked me through the financial aspects of home ownership. Within a few short months, I was living in a gorgeous new home that I absolutely loved. Check out this blog for great advice on home ownership.