Speaking to a Lender First

What comes first, open houses or financing? Most real estate experts advise buyers to make their way to a lender before they start shopping for a home. Doing so will allow you to immediately narrow down your choices to only homes in the appropriate price range. This also results in a valuable piece of paper that lets sellers know that you are serious about buying a home. Read on to find out more about being pre-approved for a home loan.

What is a Pre-approval?

Speaking to a lender will provide you with lots of good advice when it comes to financing your home. They can advise you on how to get your budget and credit score to their best, and more. Sometimes, just as important, is what you should not do once you get serious about buying a home. For instance, it's a bad idea to also apply for an auto loan when looking for a home. Finally, though, the lender is likely to suggest that you go through something called a pre-approval.

A pre-approval means filling out some paperwork for the lender so that they can determine several things about you such as:

• Whether your credit is high enough to be approved for a home loan.
• How much you can afford based on your income.

What to Keep in Mind About Pre-approvals

Lenders will usually issue you a letter after the pre-approval process is complete. This letter will indicate the maximum amount of money you can borrow. The range is determined by your income and other factors. However, it's not a guarantee of a loan. If something should change in your employment, income, or your credit report, you could still be turned down for a loan. However, the amount you are pre-approved for is within a range that you are likely to be approved to borrow should everything be the same when you apply for the mortgage.

It's also important to understand that you can find a home that costs less than the pre-approval allows because what you can afford is ultimately up to you. What matters is that you can afford to make the payments and that you only go over the pre-approved amount if you intend to provide a down payment.

Pre-approvals can give buyers an edge over others that may not be pre-approved. It signals that the buying process will go smoother for everyone. It also gives you confidence when you make your buying choice. To learn more about the pre-approval process, speak to a real estate loan lending program.