Starting with a mortgage when you want to buy a house may seem strange, but it can actually be a very smart strategy for those who don't want to waste time. But how can you get pre-approved for a loan from the bank without having chosen a house and without even knowing how much you will spend on the purchase? And why is it a good option to do so? We explain everything, with the help of experts.
Mortgage pre-approval consists of analyzing the customer's financial profile, assessing their income, expenses, and associated risk level, and based on that, calculating a loan amount for which they can obtain approval, as explained by UCI in this article prepared for idealista/news. The result of this procedure is, therefore, a maximum ceiling, which reflects the amount of financing that the credit institution can finance, under certain conditions.
The usefulness of this preliminary analysis
·Define a price range for your house search
It should be noted that, currently, most credit institutions grant a maximum financing amount of up to 90% of the property value. Therefore, by knowing how much they can borrow, customers also have an idea of the purchase price they can afford, avoiding wasting time on properties that are not within their current financial capacity. Thus, when starting the search for properties, potential buyers can already define a realistic price range for which they know they can obtain the necessary financing to complete the transaction.
·Define the type of home you can buy
Similarly, knowing in advance the amount of financing you can obtain before you start looking for a home can help you define other criteria for searching and selecting properties, such as location, type, square footage (sq. ft.), and finishes, for example. Knowing how much you can afford is an excellent strategy for not wasting time on properties that you cannot afford or that may cause frustration during the purchase process.
·Give a more immediate response
Many deals fall through because buyers, when they find a house they like, cannot commit immediately and need to obtain approval for the mortgage first. In the meantime, another interested buyer comes along and gets ahead of them. Having pre-approval ensures that, subject to the approved conditions (such as the purchase price of the home), you can obtain a loan up to that amount, so if you find the right home at the right price, all you have to do is close the deal.
·Streamline the credit process
Dealing with the loan process at a time when you are only thinking about moving house can be stressful. By having pre-approval for the loan, you are making the process simpler and faster in the end, and you may even be able to move house sooner.
“Ultimately, pre-approving your mortgage can be a way to make buying a home more focused and effective, knowing from the start what you can count on and what kind of home you can buy. No wasted time, no unrealistic expectations,” summarizes UCI.
Source: idealistanews