What Is Pre-Approval
Pre-approval means that you've met and conferred with a mortgage lender, your credit files have been reviewed, and any questions which the lender may have had, have been answered. Your loan consultant, after consideration, believes you to be credit worthy and qualified to borrow up to a predetermined amount. Based on the information you provided, your loan consultant, or company, will issue to you a letter of pre-approval which shows your borrowing power to home owners.

Being pre-approved is not the same as closing on your purchase or your mortgage. The full process will still need to be completed, but your pre-approval will speed up the loan process because most of your information has already been reviewed and will only need to be confirmed.

What Are the Advantages
Outside of speeding up the loan process, pre-approval gives you power when searching for a home. Having your letter of pre-approval will show sellers that you are serious and that you are able to afford the home. Why is this important? Because the seller may have a number of offers on the table. Your offer will have a greater chance of acceptance if the seller knows that there will not be financing contingencies or additional delays.

Another advantage of pre-approval is the disappointment factor. In many cases, would-be home buyers will scour the local market looking at every home in every neighborhood. It's a big task and often times can dampen the fun of buying a home. If you are pre-approved, you know about how much money you are willing, and able, to spend. This will help you to narrow your search, and make your Realtor's life a little easier. There are also some cases where a home buyer has found that perfect home, made an offer, and later found out that they were unable to secure the financing. This is not a situation anyone likes and is easily avoidable by working with your lender prior to making an offer.

Not many home buyers will pay cash for their next home, in fact, according to the National Association of Realtors, close to 90% of all homes purchased are financed. If you know that you will need a loan to buy your next home, it is a good idea to give yourself the security, the peace of mind, and the perks of having a letter of pre-approval.