With five major universities, Philadelphia is a hot spot for intense collegiate basketball competition. The Big Five also graduate thousands of students each year, many of whom decide to settle in the city or local suburbs. These first-time home buyers may wonder if they need to spend the time working with a bank or mortgage company to secure a mortgage pre-approval before purchasing a home. The short answer to this question is definitely yes.
In today’s market, a mortgage pre-approval has become almost a necessity for first-time buyers. To streamline the home purchase process, real estate agents prefer to work with serious buyers who have a clear idea of how much they can afford.
What Is a Mortgage Pre-Aproval?
According to the Federal Reserve Bank of Philadelphia, a pre-approval occurs when a lender examines a person’s financial position and credit, and then issues a written commitment to extend credit (in this case, a mortgage loan) up to a designated amount, for a stated period of time. The process of obtaining a pre-approval closely mirrors the mortgage loan approval process. However, after a pre-approval is secured, if the individual decides to purchase a home, obtaining a mortgage is much easier than it would be without the written commitment.
Where Can You Get a Mortgage Pre-Approval?
Online mortgage calculators provide a good starting point to give buyers a sense of how much they can afford, but an official pre-approval document must be prepared by a loan officer at a bank or mortgage company. Prior to house hunting, potential home buyers should call several banks or mortgage companies and compare rates and fees before beginning the pre-approval process. Your real estate agent may also be able to provide referrals for local mortgage lenders.
What Information Do You Need to Obtain a Pre-Approval?
To obtain a pre-approval, your must provide a loan officer with certain financial information. Prior to your appointment, spend time organizing and gathering this important financial information. For pre-approvals, loan officers may request recent tax returns, proof of income (such as paystubs), and savings account statements. Retirement account information, such as 401(k) statements, may also be used to establish financial position. A credit report will also be run to verify current debt balances and payments.
How Does a Pre-Approval Help Buyers?
In today’s busy Philadelphia real estate market, those potential buyers armed with a pre-approval have a greater chance of nabbing their dream home. Buyers should view their pre-approval as a competitive advantage in a hot real estate market. In a multiple-bid situation, buyers use their pre-approval need to demonstrate financial strength backing up their offer. A pre-approval letter offers support to a bid and provides assurance to the seller.
For those Philly Big Five grads who want their first home purchase to be a slam dunk, a mortgage pre-approval will help guarantee success.
Original article written by Jennifer A. Digiovanni | Coldwell Banker Blue Matter
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