If you're considering moving forward with purchasing a home, it's important to complete some steps early on in the process. Finance expert Dave Ramsey highlighted some of the things you should do, including getting pre-approved for a home loan.
Here's why Ramsey thinks the pre-approval process is essential if you want to buy a property of your own.
Ramsey says getting pre-approved can help you in this important way
Pre-approval is the process of working with a mortgage lender before you actually make an offer and are ready to buy a property. During the pre-approval process, your potential lender checks your credit and other financial credentials, lets you know how much you can likely borrow, and lets you know what rate you'd be offered.
Although this process doesn't guarantee you a loan, it's essentially a conditional approval and if all goes well with the house and nothing changes with your finances, you'll be able to get the loan the lender pre-approved you for.
It can take time to go through the pre-approval process, but Ramsey thinks it is worth doing because, "Getting pre-approved for your loan before you buy will be helpful when you're ready to make an offer on a home you love."
Is Ramsey right?
Ramsey is absolutely correct that it is very important to get pre-approved for a home loan before making an offer.
The majority of home sellers are not going to take your offer seriously if you do not include proof of mortgage pre-approval. That's because when sellers accept an offer, they have to change the status of their house from "active" on the market to "pending." This deters others from looking at the property, and when a house goes back from pending to active, it can make future potential buyers wary of moving forward.
Home sellers don't want to take the chance of changing the status of their home to pending and losing time when other buyers might want the house unless they're pretty sure you can afford the property and move forward with the transaction. Pre-approval maximizes the chances you'll be able to actually close the deal -- and sellers want to see that.
The fact that a pre-approval gives you a better chance of getting your offer accepted is undoubtedly the most important reason to complete this step for that reason -- although, there's also another benefit in that pre-approval can help you see what a bank will allow you to borrow.
Ramsey did suggest getting pre-approved for a 15-year mortgage, though -- and for most people, a 30-year loan is going to be a better option due to the fact it comes with lower monthly payments and more flexibility that allows you to accomplish other important goals with your money.
Still, whatever loan you are interested in, you should absolutely take care of the pre-approval process both to put a seller's mind at ease and to help you avoid wasting time looking at properties that cost more than you'd potentially be approved to borrow.
If you have your pre-approval in hand, you'll know exactly which homes are within your budget so you can focus your search and you can make the strongest offer possible to maximize your chances of being able to buy the property of your dreams.
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