If you’re planning to finance your home in Texas with a mortgage, one of the first steps you must take is to get pre-approved for a home loan by a lender. A mortgage pre-approval is a letter that shows the amount of mortgage you may qualify for based on your financial history. As a first-time homebuyer, you should know when to get pre-approved for a mortgage loan.
Homebuyers should get pre-approved for a home loan before they start shopping for a house in Texas. A mortgage pre-approval allows a homebuyer to find out how much they can afford and structure their home search the right way.
Keep in mind that a pre-approval is not the same as being pre-qualified, which is a common misconception among first-time homebuyers. In the remainder of this article, we’ll discuss the differences between the two, the importance of getting pre-approved, and when the best time to get pre-approved is.
When Should You Get Pre-Approved?
Since the average home buyer spends around 10 weeks searching for a house, you should consider getting pre-approved at least 1 to 2 weeks before you begin your house hunt.
However, although you must get pre-approved before you start shopping for a home, pre-approvals do not last forever. Mortgage pre-approvals typically last between 30 to 90 days, depending on the lender.
In fact, some lenders may not honor their agreement if you present a pre-approval letter past 60 or 90 days; this is because, during that period, your financial circumstances may change.
Why Do You Need to Get Pre-Approved for a Mortgage?
With the banks, lenders, and even the real estate agents requesting that you get a pre-approval letter before looking at homes, you may be wondering why you need one. There are several reasons why you should get pre-approved for a mortgage loan in Texas:
It Makes You Appear More Qualified Home Buyer
Agents are busy individuals and don’t want to waste their time taking on an unqualified buyer. And if the seller is still living in the house, they wouldn’t want to get the seller out of the home for an hour or two to show around an individual that is likely not to get the house.
A pre-approval makes you appear as a more serious buyer or someone willing to act upon seeing the house.
Your Offer is More Likely to Be Accepted
Most of the time, when you contact the listing agent, they are likely to ask if you have been pre-approved by a local lender. Also, when buyers send in their offers, sellers, especially in a multiple offer situation, give preferences to offers by buyers with a pre-approval letter from a lender.
You Can Easily Plan Your Home Search
One of the best aspects of getting pre-approved by a lender is knowing how much home you can afford based on your financial history. You don’t want to find your dream home only to learn from your lender that you cannot afford it.
A pre-approval letter shows you a detailed analysis of your interest rate and specified loan amount. So, you can easily plan towards your home search based on the information on your pre-approval letter.
Getting Pre-Approved vs. Pre-Qualified
With pre-qualification, you only need to supply your lender with an overview of your financial history, including your income, assets, debt, and credit score. Your lender will review this information and give you an estimate of what you would likely qualify for.
Mortgage pre-qualification doesn’t always require you to supply your lender with your financial history documents. It could be self-reported and can be done over the phone with your lender. It generally takes 1-2 days to receive a pre-qualification letter from your lender.
For a mortgage pre-approval, you must complete an official mortgage application to get pre-approved. You’ll also need to supply your lender with all the documentation that is required to perform an extensive check on your financial history. Documents may include:
- Pay stubs
- Bank statements
- Employment history
- Credit report
Unlike a pre-qualification, your lender can pre-approve you for a home loan up to a specific amount after analyzing your financial history. You also have a better idea of the interest rate you will be charged with the loan.
Most importantly, your lender will send you a pre-approval letter confirming the specified amount of mortgage you are entitled to. So, a pre-approval is a more preferred choice by sellers and real estate agents when you’re looking to buy a home in Texas.
Whether you’re applying for a mortgage loan for your first or even fifth house, getting pre-approved by your lender is an essential step to getting home financing. Not only does it help you determine the type of home you can afford, but it also helps you put forward a more “serious” offer.