Mortgage pre-approvals are often thought of as a necessary first step when buying a home, but do you really need one? This article explains what a pre-approval is and what it means for potential homebuyers.
What is a mortgage pre-approval?
A mortgage pre-approval is a preliminary mortgage approval. Note the emphasis on the word preliminary — getting a pre-approval is not the same as getting a mortgage.
When you are pre-approved for a mortgage, what this means is that a bank or mortgage lender has looked at your income, tax returns, and probably your credit score and decided that you might be eligible for a mortgage. However, it usually doesn’t involve looking at credit reports or doing any in-depth credit checks, which are required to actually get a mortgage. Basically, by issuing a pre-approval, the bank or mortgage lender is identifying you as a potential candidate for a mortgage and giving you an idea of how much that mortgage might be as well as the interest rate you could expect to play.
Contrary to what many people think, a pre-approval is just the first step in securing financing a home. A pre-approval will not guarantee you a loan — you will still have to go through the rigorous process of applying and getting approved for the mortgage.
Why should you get pre-approved for a mortgage?
If a pre-approval is only preliminary, why is it considered such an important part of the homebuying process?
Here is where the confusion often comes in. The main reason to get pre-approved for a mortgage is not to make you more likely to get the loan. The main reason is to make you more likely to get the house. Many sellers reject offers outright if the potential buyers don’t have a pre-approval. This document signals to a seller that you are serious and likely able to pay for the house. It also puts you in a better position to negotiate.
So, is a pre-approval absolutely necessary to buy a home? No. But is it a good idea? Yes. Having a mortgage pre-approval in hand will make your bid more attractive to the seller.
How we can help
Homebuyers today have many choices of where to get a mortgage pre-approval — national banks, community banks like ours, credit unions, online brokers, and others. At Oak Bank, we strive to make it as simple as possible to help you navigate the complex world of home financing.
What sets us apart is the emphasis we place on building a one-on-one relationship with you. At Oak Bank, you will work with the same financial expert for both your pre-approval and your mortgage, rather than having to deal with multiple people at different stages of the process. This way, your unique needs are met by the familiar face of an expert who is already aware of your situation and can help you with any additional steps required to get your mortgage approved. Also, because all of the information you submit for a pre-approval is also necessary for the final approval, we make sure that you need to submit that information only once.
Learn more about our mortgage loans and how we can help you achieve your homeownership dreams.