Business Tips

What Is the Pre-Approval Process Like?

During the COVID-19 pandemic, people spent hours sitting inside. Today, many of these people are looking for a new place to live and a new home in a better location and has its ideal features.

Before you can find your perfect place, it may be a good idea to seek pre-approval from your local financial institution. This can make the selling and buying process easier so you can focus on making your new house a home.

Know the difference between getting pre-qualified and pre-approved.

Before you can start to look for a new place, the first thing you need to do is determine whether you want to get pre-qualified or seek out pre-approval. A pre-qualification for a mortgage estimates how much a buyer can spend on a house, giving buyers a rough estimate when they start looking. This is a great way to make sure the right place for you is also right in your budget.

The lender has checked out all of the documents related to the buyer’s credit and assets with pre-approval. They will approve a specific loan amount that usually lasts between 30 to 90 days. With pre-approval, potential buyers can make offers on new homes with the confidence that they have the funding to complete the purchase.

You can increase the value of your current assets.

You might not be able to get a raise from your employer or immediately boost your credit, but you can increase your pre-approval value by improving your existing home. For example, you can add upgrades like a new patio to make your house more valuable or remodel existing rooms to make them more appealing. You may be surprised at how a fresh coat of paint and new bathroom tiles can increase the perceived value of your home and boost your pre-approval amount.

A great option to fully understand your home’s value is to meet with a realtor or home appraiser before you begin the approval process. They can estimate how much your space is worth.

You don’t have to spend the full amount you are approved for.

The amount you are pre-approved for is meant to reflect the high-end rates that financial institutions will approve. However, you don’t need to look for a new place in that budget. You may decide to opt for a more affordable house that has some of your most important features or is a short drive to your pup’s favorite hiking trail.

As you look for a new house, consider your design aesthetic as well. During the first few months, you will likely focus on making your house feel like a home with fresh backsplashes, bright colors, and unique accessories. You may want a smaller mortgage that allows you to renovate your new space and make it feel like a resort.

Pre-approval sometimes takes time.

You may want to rush out and get pre-approved, so you can move forward with buying a new house, but the approval process can take time. Lenders will review various documentation to make sure your assets align with the amount you claim to have. They want to see your most recent tax returns and will call your employers to verify that you work there and that your income is accurate.

Don’t worry. If you want to sell your house this spring, you have plenty of time to take a vacation this winter with your dog and get back before your approval window starts.

Don’t let the pre-approval process leave you overwhelmed. By working with a lender ahead of time, you can find a new house with the best functions and designs for your needs.