Edward Sugden's Blog

The First Step to Home Buying, Mortgage Pre-appoval


Posted: January 17, 2017 at 12:00 AM by Edward Sugden

In most markets across the country right now, the number of buyers looking for their dream homes greatly outnumbers the number of homes that are for sale. This has led to a competitive market where home buyers often need to be aggressive. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before beginning your search.
Even if you are in a market that is not as competitive, knowing your budget can give you the confidence of knowing if your dream home is within your reach. 
Freddie Mac lays out the benefits of pre-approval within the My Home section of their website:
“It’s highly recommended that you work together with your lender to get pre-approved before you start house hunting. Pre-approval can tell you how much home you can afford and might help you move quicker, and with a lot more confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that most have relationships with lenders who will be ready to assist you with this process. Once you have selected a lender, you will need to fill out their application and provide them with necessary info relating to “your credit, debt, work history, deposit and residential history.” 
Freddie Mac describes the four C's that help determine the amount you will be qualified to borrow:
  • Capacity: Your current and future ability to make payments
  • Capital or cash reserves: the money, savings and investments you have which will be sold  quickly for cash
  • Collateral: the house, or kind of home, that you would like to buy
  • Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of several steps that may show home sellers that you are serious regarding buying, and it usually helps speed up the process once your offer has been accepted. Most selling agents are knowledgeable enough to know not to accept an offer with out a pre-approval letter. 
Bottom Line
Many potential home buyers overestimate down payments and credit scores required to qualify for a mortgage. If you are prepared and willing to buy, you will be more than happy to speak with a lender to start the home buying process.

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