Why do I need to have a mortgage pre-approval before looking at luxury homes?

Why Do I Need to Have Mortgage Pre-Approval Before Looking at Luxury Homes?

by Myra Jensen, Broker Associate – The Myra Jensen Team – Licensed in MN

Why Do I Need a Mortgage Pre-Approval Before Looking at Luxury Homes?

Almost every day I will get a phone call from a potential buyer, requesting to see a home that is on the market.  I always ask if they have a mortgage pre approval, and most of the time the answer is “No, that won’t be a problem” or ” No, I don’t want to get a mortgage pre-approval until I find the home I like.”  Here are the top 5 reasons why you need a mortgage pre-approval before looking at luxury homes.

1. Know that you are in the position to buy.

In todays lending climate, mortgage underwriters are much more thorough and picky than they ever have been. Even the most qualified buyers are sent scrambling for paperwork sometime up until the day of closing.  Applying for a mortgage will give you the time and freedom to correct any issues that may pop up on your credit report, or  know how much of a down payment you need to save up.  You do not want to fall in love with a home, just to be told you do not qualify for a loan.

2. Know how much mortgage and monthly payment you are comfortable with.

It’s one thing to know how much you want to spend on a home, but most buyers are concerned with the monthly payment.  Sitting down with a lender  and discussing your budget will make sure you know how much mortgage you are comfortable with.  A good lender will show you how much a house will cost on a monthly basis, including the tax, interest and insurance costs.  If you are looking for a town home or condo, you will also want to estimate association dues.  You do not want to get in over your head.  Luckily, interest rates are still low, and many buyers are still finding a home to buy that has a lower monthly cost than renting.

3. Be ready to make an offer quickly when you find the right house.

When inventory is low, the best deals on homes go quickly, and often have more than one buyer competing to buy, or “multiple offers.”  If you see a home, and you love it, the seller will most likely not even consider your offer without a solid pre-approval letter from a reputable lender. Getting a mortgage pre approval before looking at luxury homes will make it possible for you to work with your agent to quickly make an offer on the home, sometimes before other buyers even see it.

4. Know which types of financing are available and how much downpayment you will need.

Conventional financing has loan limits, so it is important to know how much downpayment you will need to purchase your next home.  Some loans require a smaller down payment than others.   Get a mortgage pre approval before looking at luxury homes so you know up front what types of programs you qualify for, and therefore know how much money you will need to bring to the table to purchase your home.

5. Security for the Seller – and the Agent

If you were selling your luxury home, would you want just anybody walking through it? Or rather, would you want to be assured that only qualified, pre approved buyers are viewing your home?  Recently, real estate agents have been attacked or even killed by people posing as buyers.  Our team takes the safety of our sellers and our agents very seriously.  We do not want to put our agents in a position where they meet strangers at a home.  When you have a mortgage pre approval before looking at luxury homes, the seller and the agent know that you are a qualified and serious buyer.

If you have questions about purchasing a home, or need a referral to a qualified lending professional, please contact us and we will be happy to help you get a mortgage pre approval before looking at homes to buy!