Getting pre-approved for a mortgage is always good news for prospective homeowners. Unfortunately, many of them tend to mistake pre-approval for actual approval. Hence, it comes as a shock to many of them when they get turned down for a mortgage. Pre-approval is not the same as a final approval, so it is important that you appreciate the difference when looking to secure a mortgage.
Your pre-approved figure may not be your actual figure
It is fairly easy to get pre-approved for a certain amount; that is because lenders often don’t ask for extensive documentation in the pre-approval process. The pre-approval figure is merely an estimate of how much the lender could potentially give. The actual amount is only given after a thorough examination of the property in question and the financial status of the homebuyer. In the end, the amount the prospective homeowner qualifies for might not match the value of the house.
Pre-approved rates are not necessarily the best
Statistics show that most homeowners don’t end up taking the mortgage they were pre-approved for. Pre-approved rates are often slightly higher than the market rate, and this is assuming that you are pre-approved. It is best to check rates 30 days before closing, as they tend to be slightly lower than the market rate.
Your financial situation is crucial
Many lenders pre-approve you without asking for details about your financial situation. However, this will change when it is time for a formal approval. It is only when the lender gets a better idea of you financial situation that they will determine that you can get a mortgage at the pre-approved rate.
The property itself is important
Your financial situation is not the only thing lenders take into consideration. The property itself is also a big factor in whether you get the mortgage. The property might be overpriced, or it may belong to a certain category of buildings that the lender doesn’t approve for.
Pay attention to features
Pay attention to all the features that come with a pre-approval, such as rate holds, discounts, and penalties. Also, choose lenders that have a thorough vetting process for pre-approval. This way you will less likely end up with surprises in the end. Getting pre-approved is useful, but it is not a guarantee of anything. It is actually quite possible to get a good mortgage without pre-approval. The best way to take advantage of pre-approval is to make sure you have your own finances in order and do as much shopping around as possible. For more information on pre-approval, contact us today.