Simply put, pre-approval is when your lender really looks into your financial history and lets you know how much they would be willing to lend you.
Two Good Reasons To Get Pre-Approved
To get a sense of your true budget.
Trust us — you don’t want to start house-hunting without knowing your actual upper limit. But please proceed cautiously here. Just because your lender might be willing to lend you a certain amount of money doesn’t mean you can truly afford to borrow it. Remember, you ultimately need to set the amount you are comfortable spending on a home, not the bank. But getting pre-approved at least gives you a ballpark of what might be appropriate for you.
To show you are serious.
Once you feel ready to buy a home, getting approved sends an important signal to your partners (like a potential seller) that you are a responsible buyer who is doing his or her homework. If you ultimately make a bid on a home, the seller will respond more favorably to the fair offer that arrives with a pre-approval letter – which shows that you can actually put your money where your mouth is.