As a first-time homebuyer, it is easy to get caught up in the excitement of finding your dream home. However, it is important to remember that obtaining a mortgage is a major financial decision that should not be taken lightly. Mortgage pre-approval is crucial in the home buying process, and skipping it could lead to serious consequences.

What is mortgage pre-approval?

Mortgage pre-approval is a process where a lender reviews your financial information and credit history to determine how much they are willing to lend you for a mortgage. This process gives you a better understanding of how much home you can afford, and it also gives you an advantage in the home buying process.

The consequences of not getting pre-approved

Limited home options

Without mortgage pre-approval, you won’t know how much home you can afford, which can limit your options. You might fall in love with a home that is outside of your budget, and that can result in disappointment and wasted time spent on touring homes that you cannot afford.

Missed opportunities

In a competitive housing market, missing out on a home is a common occurrence. Skipping mortgage pre-approval could cause you to miss out on a dream home because another buyer who is pre-approved made an offer.

Financial Risks

Without mortgage pre-approval, you risk not being approved for a mortgage, which means you won’t be able to secure a home. This can lead to the loss of an earnest money deposit, which is typically 1-2% of the sales price of the home. This can result in a significant financial loss.

A person with a sad face looking at a sold sign in a front yard

The benefits of getting pre-approved

Confidence in Your Budget

Obtaining mortgage pre-approval before house shopping can help you figure out how much home you can actually afford. This will provide you with a realistic budget to work with and improve your confidence in the home buying process.

Faster Closing

Mortgage pre-approval can significantly shorten the timeline between making an offer and closing on a home. By having your financial information ready, the lender can quickly process your loan application and close on the loan faster than if you hadn’t been pre-approved.

Advantage in Bidding Wars

In a competitive market, a pre-approved buyer can gain an advantage over buyers who have not yet been pre-approved. When a listing agent receives multiple offers, the pre-approved buyer’s offer will be viewed more favorably since they have already been approved for a mortgage and are more likely to close the deal.

A person holding a home key with a big smile on their face

Conclusion

Mortgage pre-approval is a critical step in the home buying process and should not be skipped. Skipping it could lead to missed opportunities, limited options, and financial risks. By taking the time to get pre-approved, you can save time and avoid disappointment. Not only does mortgage pre-approval ensure that you’re shopping within your budget, but it can also increase your chances of obtaining the home of your dreams.

A person in front of a house holding a sign that says "Home Sweet Home"