Before you begin the massive undertaking of searching for your dream home, you first need to secure mortgage pre-approval. Scrolling through house listings of beautiful potential future homes in your favourite areas is tempting, but holding off until you know what you can spend on your home is a good idea. What exactly is pre-approval, and why is it necessary?
What is mortgage pre-approval?
You can apply for pre-approval or a mortgage in principle with any lender or broker. It is different from a mortgage calculator, which just gives a very rough idea of what you could potentially lend. A mortgage, in principle, on the other hand, is a more accurate appraisal of what you can borrow based on your monthly income and expenses and lasts for about 90 days. Keep in mind it is not a guarantee, so you will still need to complete a full mortgage application once you are ready.
You can easily calculate how much you can borrow with Trussle’s mortgage in principle. They check your credit history and eligibility with 18 lenders to calculate how much you can borrow for a property. Once approved, you are in the best possible position to start searching for homes in your price bracket confidently. It will also help you have a clear and realistic view of home much you need to save for down payments and closing costs.
When meeting with real estate agents having your mortgage pre-approval ready is essential and will make a big difference to your property search. Both agents and sellers will take you seriously, and often having a mortgage in principle will set you apart from other buyers. Estate Agents like ReMax highly recommend having a pre-qualification letter in your hand as it lets sellers know you mean business.
Tips for Mortgage pre-approval
These are a few quick tips to put yourself in the best position possible when getting a mortgage in principle:
- Firstly, understand what your current debt is by checking your credit score. People often procrastinate when it comes to getting a clear idea of what debt they have, but it is not as daunting as it might seem. You can check your credit rating quickly online with ClearScore. A soft credit check does not affect your credit score.
- Next, you need to find a good mortgage lender or broker. Shop around for a broker with a good reputation that offers the best rates on the market. Remember, pre-approval is not a finalized mortgage agreement, so you are not tied to anything.
- Get all your paperwork ready and avoid unnecessary complications and delays down the line that could mean missing out on your dream home. Usually, you will be asked for employment status, earnings, and credit history.
- Then you are ready to find a good estate agent once you have been approved for a mortgage in principle. A good place to start is to check out Trustpilot, which compares and rates real estate agents for you.