Start the mortgage process well before bidding on a home. We can often recommend mortgage sources with the best terms and rates. Most lenders give you the option of making the loan application right online. Once you submit your loan application, the lender will reach out to let you know which programs best meet your needs and how much you can afford.
Preapprovals are also recommended for another reason. When an offer is made, sellers will often require buyers to apply for financing within a given time period. By meeting with loan officers in advance and identifying mortgage programs, it won’t be necessary to quickly find a lender, do a check credit and rush into a financing decision that may not be the best option.
“Preapproval” means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a preapproval letter, which shows your borrowing power. You can visit as many lenders as you like and get several preapprovals, but keep in mind that each one does a new credit check, and too many credit checks could adversely affect your credit rating.
Although it is not a final loan commitment, the preapproval letter will be submitted along with the offer when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.