Getting pre-approved for a mortgage can be a concrete step along the way to making your home ownership dreams come true. If you’re thinking of getting pre-approved, it’s important to understand the process and what’s involved before moving ahead. Here are some useful things to keep in mind.
What is pre-approval?
Getting pre-approved can help you find out how much you can borrow to purchase a home. Lenders look at various factors, including your credit score, employment status, and income to tell you how much you might qualify for, what types of loans you might be eligible for, and what your interest rate could be.
Different lenders have varying requirements, but pre-approval will often start with filling out a mortgage application and undergoing a credit check. Lenders may require other information, like proof of income, proof of assets, and information about your debt-to-income ratio.
If you are pre-approved, the lender will generally provide a letter stating the amount they are willing to loan you and set an expiration period, often within a window of 60 or 90 days.
The home shopping process
The home shopping process is another exciting step along the road to home ownership. Everyone’s situation is different, but it is often wise to wait to get pre-approved until you are truly ready to start shopping for a home. If you do it too early, the pre-approval may lapse before you are ready to commit to a mortgage.
Be aware of monthly costs
Budgeting for monthly costs and keeping a close eye on your finances can ensure that you’re shopping for a home you can afford. Beyond the mortgage, costs can include insurance, closing costs, property maintenance, taxes, new appliances, and home repairs and upgrades.
Take note of the neighborhood
Before committing to a new home, take stock of the neighborhood to be sure it is a good fit for you. Survey things like noise levels at different times, how well the streets and sidewalks are kept up, how regularly things like trash and recycling are picked up, the quality of the schools, community amenities, and property tax rates.
Monitor interest rates
If your timeline is flexible, keeping an eye on interest rates can help you get better rate on your mortgage. Consider watching interest rates online and checking back regularly, being aware of rate changes in the news, and staying on top of your credit to help you secure a more favorable mortgage rate.
Consider working with an agent
Working with real estate agent can help you to streamline your home shopping process. A good agent can suggest listings and rule out homes that aren’t suited to your needs. Research reputable agents and agencies in the areas you are considering buying a house in, then get in touch with ones you feel might be a good fit.
Remember purchase protection
Buying a home can be a big expense, and it is important to keep purchase protection in mind. Life insurance can ensure that you heirs can continue paying the mortgage even if you pass away unexpectedly. Depending on your financial situation and priorities, you might choose to get a permanent policy like whole life insurance, which offers a guaranteed death benefit and cash value, among other perks.