Mortgage Preapproval: What to Do Before You Start Touring Homes
It’s tempting to begin with home photos and open houses. Before your search gets serious, though, a conversation with a lender can help you understand what you may be able to borrow and what payment feels comfortable in your budget.
Prequalification and preapproval are different starting points
A lender may offer a quick estimate based on information you provide about your income, debts, and savings. A preapproval usually involves a closer review of your finances and credit. Lenders use the terms prequalification and preapproval differently, so ask what they actually reviewed and what the letter means.
A preapproval letter is helpful when you’re ready to shop and make an offer, but it isn’t a guarantee of a final loan. Your approval will still depend on the lender’s review of your full application and the property you choose.
Decide on a comfortable payment, not just a maximum price
The amount a lender may approve is one piece of the decision. Consider the full monthly cost of owning a home: loan principal and interest, property taxes, homeowners insurance, and any mortgage insurance or homeowners association dues that apply. You’ll also want room in your budget for utilities, maintenance, and unexpected repairs.
Down payments vary by loan program. You may have options that require less than 20% down, although mortgage insurance can add to your costs depending on the loan. Ask each lender to show you how different down payment amounts would affect both your cash needed upfront and your monthly payment.
Plan for money due at closing
Your down payment is only part of the cash you may need. Closing costs can include charges for the loan, appraisal, title services, taxes, and insurance. Once you submit a mortgage application with the required information, a lender generally must provide a Loan Estimate within three business days. Use it to compare loan options and ask about any costs you don’t understand.
BUYERS TIP:
It’s okay to talk with more than one lender. Comparing offers can help you understand the available rates, fees, and loan terms. If you’re shopping for preapproval, keep your applications within a relatively short period and ask lenders how their credit checks will be handled.
Ready to Begin Your Search?
When you know your budget and have a lender lined up, your Steinborn REALTOR® can help you focus your search on homes that fit both your needs and your financing plan. Let’s talk about where you’d like to live and what you want your next home to offer.
