I am interested in buying a home in Mint Hill (I am a first time home-buyer) and I am wondering if you think it is necessary to get a pre-approval - or just a pre-qualification? My credit is good and I just got a raise in my job, so I don't know if this is a necessary step or what I would do to get this before I start the home search.
Starting a home search? Go into it with a pre-approval, not just a pre-qualification, for a mortgage.
A pre-qualification is a simple and informal process where you get an estimate from a bank regarding how much you will likely qualify for if you apply for a mortgage with that bank. It gives a ballpark figure, but it’s not a solid commitment. Many factors, such as credit scores and outstanding debt, may actually affect how much you’ll be approved for.
A pre-approval is a much more reliable. The bank draws up a letter pre-approving a mortgage up to a certain amount. To get that pre-approval, you’ll supply a statement of earnings and assets, and the bank will pull a credit report.
If you have a pre-approval in hand, it demonstrates you are serious. It also gives you an edge in several ways:
--> If you are one of two sets of buyers looking at the same house and making approximately the same offer, guess who usually wins? You got it! The ones who have a pre-approval typically get the house.
--> Buyers with a pre-approval often have more bargaining power. If the sellers know they have an interested pre-approved buyer, they are more likely to be open to negotiation.
--> Possession of a pre-approval can speed up the closing.
One word of caution: If any of your conditions change from the time you apply for a pre-approval to the time you go for the mortgage (such as employment status or debt load), the pre-approval may no longer be valid.
In the long run, getting a pre-approval is worth the additional time and effort.