The Advantages of Loan Preapproval

Real estate experts tell first-time homebuyers that it's critical to apply for a loan before shopping for a home, and it's true; this is an essential first step. But do you know that it's far better to be preapproved for a loan than to be prequalified? There are more advantages to gaining preapproval than you would initially surmise. When the lender hands a borrower a preapproval letter, it means the borrower can:

Save Time by Looking at the Right Homes
If your real estate agent is sending you automatic e-mail listings of available homes, you can ask her to change the parameters to narrow down the selection of homes that you are qualified to purchase. If you're not receiving e-mails from your agent, ask him or her to send them to you.
Most MLS systems allow an agent to send clients much of the same data that agents receive. This way, you'll save time by checking out homes you can actually afford to buy instead of falling in love with homes that are out of reach.

Spend More Time Examining the Right Homes
By decreasing the inventory of homes to those that fit within your parameters, you can allot more time to thinking about all the little nuances each home has. Many homebuyers never move past the price point when sorting out their preferences, but now you can put your energy into looking at the little things that matter to you the most, such as whether your vehicle will fit properly into the garage!

Gain Confidence & Avoid Disappointment
Now when you find that perfect home, nobody can take it away from you by telling you that you do not qualify to buy it. You can reduce anxiety and eliminate last-minute loan surprises that could disqualify you. You'll sleep better knowing that the home you selected is yours. Moreover, you can tell your friends and family that the home you made an offer on is definitely going to close and you will not "lose face" with anyone.

Increase Bargaining & Negotiating Power
Sellers will be more likely to accept your offer, even if that offer is for less than list price, because you are giving the seller peace of mind that her home is sold. She can take her home off the market and place it into pending status with ease and confidence.

Enjoy a Faster Closing Period
Because there is no window period while your loan application is processed, the lender can speed up the entire processing procedure. Appraisals can be ordered immediately. It's possible to shorten a 30-day closing to two or three weeks, which comes in handy if a seller needs to move quickly and can't decide which offer to accept. Your offer will move to the front if you can accommodate the seller's need to quickly close.

Because mortgage approval is generally the longest contingency to satisfy in a purchase contract, it is to your advantage to obtain a preapproval letter as soon as you're ready to begin your search. Lenders will render a decision based on your complete loan application, employment verification and data from all three credit reports.

The first step in getting a home loan is to find a mortgage company, mortgage bank, or mortgage broker who will lend you money.

Most banks offer savings and checking accounts, and different kinds of loans, including home mortgages. If you belong to a bank, then try to apply with them, it may make things easier for you to get a mortgage directly from them.

Mortgage companies are specialists. They don't offer any other kind of financial services. They only do home loans. This makes their operations more streamlined than banks.

Mortgage brokers are companies that have access to many different lenders and rates and they can go through many options to find a home loan that's right for you. Mortgage brokers are sometimes small companies or just individuals. They may not be as streamlined like a mortgage company.

The most important thing to you is your interest rate. It will determine how much your monthly payment will be. But, don't choose a lender just because of the interest rate. Most mortgage lenders carry the same range of mortgage types and rates. Choose a lender who is reliable and has a record of good customer service. Ask your friends and family who they recommend. If you have bad credit and one lender turns you down, then check around and try again with another lender. Every mortgage lender has different guidelines for lending. If one lender thinks you are too risky, another lender may be comfortable with you.