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The value of pre-approval for a mortgage

On Behalf of | Mar 31, 2021 | real estate law

The home buying process in Texas involves a number of steps for both buyer and seller. People who do not spend adequate time preparing may lose benefits and end up settling for a less-appealing outcome.

For buyers, in particular, a competitive real estate market means the need to stand out from other buyers to acquire highly desirable properties. Pre-approval for a mortgage is one strategy people can use to their advantage.

The process of pre-approval

The process of pre-approving homebuyers for a mortgage loan will vary from lender to lender. According to Zillow, a general pre-approval process looks somewhat like the following:

  • Accumulate and organize buyer financial history
  • Request subsequent information about co-borrowers
  • Assess credit score
  • Determine whether or not the buyer meets pre-approval requirements
  • Articulate preliminary findings in a formal pre-approval letter

The marketability of pre-approval

Buyers can use their pre-approval letter as leverage when negotiating with sellers. According to Housing Predictor, one of the top advantages of pre-approval is the buyer’s ability to show proof of financial stability. The financial aspect of finalizing a real estate purchase can take lots of time and end abruptly if a buyer does not qualify. With this knowledge, buyers can persuade sellers to consider their offer with a pre-approval letter to facilitate the process of securing a home loan.

When lenders deny pre-approval, homebuyers may consider increasing how much money they contribute to their down payment. This move may increase the size of the loan they can qualify for. Improving their credit score and checking it for any clerical errors may also improve their chances of acquiring lending even without a pre-approval letter.