When searching for a home, it makes sense to get a mortgage pre-approval and line up the necessary documents before you dive into your house hunt.
So, what’s a pre-approval? It’s the process of determining how much money a prospective home buyer will be eligible to borrow, before a formal mortgage application is filed, based on the information they have provided at that time.
With a pre-approval, you’ll get a good sense of how much you can afford, and you’ll be assured of a particular mortgage rate for a set period of time. With a locked-in rate, there is no risk of interest rate increases while you are house hunting. A mortgage advisor may be able to obtain a longer pre-approval rate hold. Another benefit of a pre-approval is that you’ll be in a much better position to negotiate with sellers.
On the other hand, a pre-approval is not a rock-solid guarantee of financing, it does not eliminate the need to make a conditional offer, and you still must consider all closing costs.