Pre-Approval Is Important—But It’s Not the Finish Line
Getting pre-approved for a mortgage is an exciting milestone. It tells you that a lender has reviewed your financial information and believes you may qualify for a home loan up to a certain amount. More importantly, it shows sellers that you’re a serious buyer.
Many buyers confuse a pre-qualification with a pre-approval. A pre-qualification is generally based on financial information you provide without extensive verification. A pre-approvaltypically involves a more thorough review of your finances and carries more weight with sellers. Even so, neither guarantees that your loan will ultimately be approved—or that you’re financially ready to buy a home.
One of the biggest mistakes buyers make is shopping for homes at the very top of their approved price range
A lender’s job is to determine how much they’re willing to lend you. Your job is to decide how much you’re comfortable borrowing. Those two numbers aren’t always the same.
Remember, the purchase price is only part of the cost of buying a home. You’ll also need to budget for expenses such as closing costs, moving expenses, furniture, appliances, property taxes, homeowners insurance, utility deposits, landscaping, and routine maintenance. Even a newly constructed home may require additional spending after you move in.
Buying at the top of your approved price range may leave you”house poor”—owning the home you wanted but having little money left for savings, vacations, hobbies, retirement, or life’sunexpected expenses.
Your financial situation can also change between pre-approval and closing. A change in employment, a lower credit score, taking on new debt, or making large purchases before closing could affect your loan approval. That’s why lenders often verify your financial information again shortly before the loan closes.
The smartest buyers view a mortgage pre-approval as the beginning of the decision-makingprocess—not the end.
Before You Decide How Much Home to Buy
Before making an offer, ask yourself:
A mortgage pre-approval opens the door to homeownership. Good financial planning helps ensure you’ll enjoy living there long after you’ve moved in.
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