When speaking to a New Orleans real estate agent, one of the first questions you will get is, “Have you spoken with a mortgage lender yet?” We aren’t asking this question to get into all your financial business. (Cause that’s not MY job! That’s for the lender to do!) We ask because we want to make sure you have your ducks in a row when you find your dream home.
However, more recently, we have been getting more home buyers pushing back about speaking with a lender right away. We think this is due to a lack of info about what a pre-approval will and won’t do for you. Let’s talk about what a pre-approval WON’T do to you!
#1: A pre-approval won’t lock in your interest rate
Sometimes, home buyers don’t want to commit to a mortgage lender immediately because when they first spoke with one, the interest rate they were quoted seems higher than what else they have seen online. Well, your pre-approval letter doesn’t lock in your interest rate. You can’t even commit to an interest rate until you have an accepted offer on a home!
What does this mean? All interest rates are quotes until you’ve selected a home. And even then, you can still shop around for interest rates and see what lender you like the most!
The pre-approval letter shows the home seller you’re sincere about buying their home. Many sellers won’t even entertain your offer without one, too! So, it’s best to jump on this if you’re a serious home buyer.
#2: Ruin your credit
Many people starting the home buying process don’t want to get a pre-approval because their credit will be pulled. However, this credit pull is NOT going to impact your credit score in a big way. This is NOT the same as buying a car.
Your credit will take a minor hit, but shopping for a home means understanding your budget. And understanding your budget means speaking with a lender about what you can afford!
#3: Hurt your househunting journey
What a pre-approval won’t do is hurt your house-hunting journey! Getting pre-approved will only make your search BETTER! There is no point in shopping for homes if you haven’t spoken with a bank in some capacity. You’re guessing at what you can and can’t afford. Just because you pay X monthly rent doesn’t mean the Zillow calculator knows what you can afford in New Orleans.
Our tax and insurance info drastically differs from what online calculators tell you. Talk with a lender. That’s how you truly know your budget!
And going back to something we mentioned earlier, most sellers will not accept an offer without a letter from a financial institution stating you’ve had your financials looked over and you’re approved for the amount of this house.
#4: Guarantee the house
While we walk about how vital this pre-approval letter is – it doesn’t guarantee you the house! You still need to make an offer the seller wants to accept. Before we write that offer on your chosen abode, we will discuss closing costs, the act of sale date, and everything in between to set you up for success and get the house you want!
#5: Let you skip paperwork
While you may have received the pre-approval from your lender, lots of paperwork and documents are needed to get you to the finish line. Be prepared to start tracking down all kinds of financial info to secure this loan and your home.
#6: Prevent a change in the approval
We know that YOU would NEVER do this, but we have seen home buyers sabotage their pre-approval by quitting their jobs, opening new credit cards, or not paying their bills on time. Just because you got that pre-approval today doesn’t mean you can mess up your credit standing tomorrow.
Make sure when you’re in the home-buying process that you don’t make any large purchases, change jobs, buy a car, etc., without speaking with your mortgage lender FIRST!
Pre-approval is absolutely necessary for home buying unless you’re paying cash for a house! So, trust us when we tell you it’s the first step in the process. We have some fantastic lenders to recommend, and they will make it as painless as possible!
Ready to start your home search? Contact us!
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