If you are looking for a home, you may have heard that a loan pre-approval is the way to get started. It's true; a pre-approval can provide buyers with a lot of important information to help them with their home search. However, part of the pre-approval involved a credit check and that puts some buyers off. Read on and learn more about how a pre-approval can affect your credit score.
What a Lending Pre-approval Can Do for You
The question of how much home you can afford is ever-present with buyers. You may have an idea of what your budget will bear, but will lenders agree with you on that price? Pre-approvals provide buyers with a range of prices that they are likely to obtain financing for. It's not a guarantee of a loan approval but it does act as a preliminary approval pending other factors. If you maintain your employment, keep your credit score steady, and find a home within the approved range, you are likely to be approved when the time comes.
Buyers are facing a lot of competition when buying a home today. Sellers enjoy multiple offers on homes that are in good condition, in good areas, and at good prices. Anything buyers can do to make them stand out helps, and a pre-approval does that. It assures the seller that you are likely to follow through on the deal and that things won't go south when the financing is not approved.
The market is still filled with homes even if the competition is tight. Being pre-approved lets buyers focus their search only on homes in their price range that they can afford. That means they are more or less likely to waste time on other homes.
Pre-approvals and Credit Dings
A pre-approval begins with the buyer contacting a lender and filling out some paperwork. In many ways, the paperwork is very similar to that of a loan application. Your employment and income will be verified, and your credit will be checked. It will be a hard ding on your credit. However, the check by a mortgage lender won't affect your score much. Then, when you apply for the mortgage, it's grouped with the pre-approval to lessen the impact. You should be ready to apply for a mortgage within about 45 days so that all mortgage-related checks will be grouped.
If you have more questions about pre-approval and the effect on your credit, speak to a company like Moneyline Mortgages.Share