Mortgages Basics: It Pays To Get A Pre-Approved Mortgage
Why Get A Pre Approved Mortgage
Should I not be shopping for a home instead of getting a mortgage
preapproved? After all, my future home could be one of the biggest
expenditures I’ll ever make. I’ll shop for the best mortgage
after I found my dream home. The reality is the mortgage interest
you pay over the life of your mortgage loan could be your biggest
expenditure and not your property.
Are you perplexed by this claim? Let’s use this example. Like
more than half of Americans, you have taken out a 30-year fixed mortgage
loan. The loan amount is $180,000. The mortgage interest rate is 6.75%.
During the life of the residential mortgage, you would have paid $240,291.57
in interest mortgage. The interest you paid on the home
loan is probably more than what you have paid for the property.
Getting your mortgage pre approved brings you various benefits:
• You'll have a better idea of what you can afford in terms
of price, mortgage down payment, legal fees and other fees such
as mortgage closing costs.
• You’ll be more likely to respect your purchasing
budget avoiding future financial difficulties. You know how much
you can sensibly borrow to buy a home based on what you can afford
on a monthly basis.
• Real estate agents and vendors will serve you better because
they know you're a serious buyer. You will be in a position to
negotiate a more favorable purchase price since they know you
are already pre-approved for a residential mortgage loan.
How To Get A Pre-Approved Mortgage
To get a mortgage pre-approved, you would go to a mortgage lender.
It could be a mortgage banker where you do your banking business,
a mortgage company or a mortgage broker. They will use information
like your gross earnings, monthly expenses, current debts and
your credit report to determine how big of a residential mortgage
loan you can get. The general rule is your home expenses (mortgage
payments, taxes, utilities, required maintenance and insurance)
should not be more than 30% your gross income.
Apply for a Pre-Approved
Mortgage Pre-Approved Facts
Once you have a preapproved mortgage in hand, you know how much
you can comfortably afford once you start shopping for your home.
Here are some other facts about mortgage pre approval.
• A typical pre-approved mortgage loan assures your interest
rate for 60 days (90 days for new construction) while you look
for a home.
• Most financial institutions assure the mortgage interest
rate for the term you select even if rates go up, provided your
purchase is done within two months.
• If home mortgage interest rates go down previous to you
completing the purchase, you should automatically get the lowest
interest rate throughout that period for the term you have This
protection could save you a considerable amount of money if home
interest rates vary while you're house shopping.
• After your lender obtains your final offer to purchase,
your mortgage can be rapidly processed, subject to a suitable
property appraisal and a formal credit review - usually within
• A Pre-Approved mortgage puts you under no obligation and
is available to you at no cost.