For many people, the financial side of home buying isn't quite as exciting as starting to look at houses. Many first-time buyers are anxious to get started, but before you head out to view Excelsior homes for sale in person, make sure to get a pre-approval letter from a reputable lender. You'll be glad you did!

Pre-Qualification vs. Pre-Approval

Pre-qualification isn't a thorough process. Often you don't even have to speak to a lender directly. Plug in a few bits of information about your income, expenses and what you think your credit score might be and you're done. It can be useful to get an idea of where you stand financially and what kind of monthly payment you can make.

But if you're serious about buying a home now, you'll need a pre-approval. A pre-approval is a deeper dive into your financial situation. Here are the steps you'll need to take.

1. Contact a lender and fill out a mortgage application. You'll provide more detailed information than you would for a pre-qualification. Lenders look at income and expenses, assets, credit score and history, and employment.
2. Provide documentation to the lender for verification. Pay stubs, tax returns, bank, and investment account statements are most common. The lender will let you know if anything additional is needed.
3. Provide your I.D. and social security number (SSN). Lenders need it to get your credit report and FICO score. Lenders will contact your employer to verify employment and salary.  
4. Although a pre-approval doesn't guarantee final approval for the loan, it increases the chances significantly.

If Pre-Approval Isn't a Guarantee, Then Why Do I Need It?

There are a few reasons. First and foremost, it shows buyers and agents you're serious. You didn't just wake up one morning and decide to buy a house on a whim. You've given this some thought and taken care of the not-so-glamorous details ahead of time. Buyers are more likely to pay attention to offers and negotiate since you've demonstrated you're capable of securing financing. A seller's agent will also often advise their client against accepting offers without pre-approval because the chances are higher that financing will fall through. If that happens, the seller has wasted their time, has to put their house back on the market and start over.  

Often real estate agents won't show homes to prospective buyers if they aren't pre-approved. It means you're starting the process at a disadvantage, so they're less likely to be able to get you what you need.  Agents know how sellers and their agents feel about it. And they know that the majority of your buying competition will have that pre-approval letter, especially in a hot market. If you're into sports analogies, it would be like coming up to bat and already having two strikes against you!

Finally, a pre-approval makes everything easier when you do find the right home. You'll be able to make an offer right away because you know how much money you can spend. You can close faster since most of the mortgage-related paperwork is complete. Once you're pre-approved and you find a suitable home, the mortgage company is concerned that the property appraises at or above market value, the title is clean, and you haven't done anything in the meantime to jeopardize your financing.

Buying a House in Minnesota with Homes by Joel

Buying a home is a big financial step, but with a pre-approval letter from your lender, you'll be on your way to homeownership in no time. Contact Homes by Joel to start your search for the ideal Minnesota home for you.