Ready to buy a home? Whether it’s your first time or you’ve been through the process before, it pays to be financially prepared. In addition to knowing what you can afford and setting a budget, that means obtaining mortgage pre-approval. During this crucial step, a lender will go through your finances, assess your situation, and determine how much financing you’re likely to receive.
While many home hunters choose to skip it, going through the mortgage pre-approval process comes with some major advantages. Here are five reasons why every buyer should consider getting pre-approved…
1) Sellers will take you seriously
It can be difficult for sellers to separate home hunters who are truly ready to buy from those who are just casually browsing. Including a pre-approval letter with your offer demonstrates that you’re ready, willing, and financially prepared to make a purchase. Put simply, most sellers feel more comfortable working with a buyer who has already gone through the initial vetting process with a lender.
2) It’s helpful in a multiple offer scenario
Purchasing a home in Toronto can be competitive. If you find yourself in a situation where you’re not the only buyer vying for a property in a multiple offer scenario, it’s important to ensure that your offer stands. Anything you can do to make it more attractive will help—including getting pre-approved for a mortgage. When two offers are similar, sellers tend to prefer the buyer who is one step closer to securing financing.
3) It makes setting a budget easier
While pre-approval isn’t an absolute guarantee that you’ll obtain mortgage financing, it should give you a solid idea of how much you can expect to receive. Once you have that number, you can start to set your home-hunting price range. Of course, there are many factors that should go into your budget, including personal expenses that a lender may not account for. That said, the sum you’re pre-approved for is a great place to start.
4) It can speed up the buying process
All too often, buyers make the wrong assumptions about how much mortgage financing they’ll receive. As a result, they wind up looking at properties far outside their price range. Fortunately, being prepared will allow you to avoid wasting valuable time and energy. By helping you understand the type of financing you can expect, pre-approval has a major role to play in the process.
5) You’ll be more realistic
Home hunters sometimes jump the gun and start looking at properties before they’re financially ready. The truth is, it’s best to know whether you’re likely to receive a mortgage before you start your search. If you apply for pre-approval and you’re turned down, you’ll know how to improve your situation before taking the next step. If you’re approved, you can move forward with the knowledge that you’re in a good position to do so.
Purchasing a home can be complicated, but there are things buyers can do to simplify the process. Knowing what to expect—and having your finances in order—is critical to your success. An experienced real estate agent can help ensure that you’re prepared for your home search—and even refer you to a trustworthy lender when you’re ready to obtain pre-approval!
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