Get pre-approved for a loan is one of the most important steps you can take as a potential home buyer. In fact, many realtors require you to make this first step before talking to them about your real estate goals. Blackstone & Company knows this can be an overwhelming process, so we want to help you through the steps so that you have the best chances of putting in the most competitive offer for your dream home. Read more to know exactly what you need to do.
The basics
What does “getting pre-approved” mean? It is a letter from a potential lender (more on this later) that declares you have the assets or means to qualify for a loan of a certain amount.
This is essential to present with any offer because it tells the seller that you will be able to pay for their property. Many sellers will not even consider an offer from a buyer if it does not include a letter of pre-approval.
You do not have to know the exact amount or property you want to purchase when you are applying for pre-approval. However, when you do put in an offer, the pre-approval letter must match the amount of the offer, so it is important to apply for the amount you are willing to purchase a property.
Another reason getting pre-approved is important is because it allows you to compete with cash offers who are able to pay everything upfront. While you may not have enough cash on hand, you do have a letter of good faith saying you are “good on your money.”
What steps do I need to take?
The process to get pre-approved is not complicated, although it may be a bit tedious.
First, you want to get a good faith estimate from 3 lenders. This allows you to compare several places. More on this in a bit.
Second, complete the online application. The lender will have its own application process, and these are usually online which makes it much more convenient for you to fill this out at your own pace.
Third, compare estimates from lenders. Not all lenders are equal. You might qualify for different loans, and even leverage those to choose the best option for you.
Keep in mind
Most pre-approvals expire after 60 days, however, it can easily be renewed with a phone call.
When we put in an offer, you will need to contact the lender to get a pre-approval letter that matches the amount of the loan. So make sure when you apply for pre-approval, it is for the amount you are thinking of offering for a home.
You are not locked into the lender who issued your pre-approval letter; however you must complete an application for a lender within 5 days of the contract being approved.
How is my credit affected?
The lenders will pull your credit reports which is considered a hard inquiry and will typically lower your credit score by a few points. Fortunately, lenders who pull your credit within 45 days do not incur any additional hard inquiries.
Not sure where to start? Reach out to us and we’d be happy to recommend our top 3 lenders in Northwest Arkansas!