This blog post originally appeared on Luca Fury’s website.
Obtaining pre-approval for a mortgage presents a homebuyer with a variety of advantages, all of which work in their favor when it comes to calculating both the costs of the loan itself and the cost of unnecessary negotiating and overhead.
Pre-approval means the buyer knows what they can spend, and they know far in advance what their payments will be. There is no possibility loan approval will become tied to the value of the property, and there is no chance of additional markup folded into the financing to benefit a broker or agent. One wonders why every loan is not pre-approved. If all this sounds good to you, here is how you too can participate in one of the best kept secrets in homebuying.
The day you open your bank or credit union account, you should say hello to your branch manager and make sure you are friendly and sociable with them from that point forward. Ask them about their family. Tell them about your new job and your plans for the future. Once you are on a first-name basis, you will find it is a whole lot easier to talk about things like loans, mortgage financing and other unwritten advantages without finding yourself on the other side of the corporate shield.
For you to obtain pre-approved financing, it has to be available to you. If this is something you think you are going to be after in the future, arrange your banking relationships so the institution you choose offers pre-approved mortgage financing. By and large, most retail banks and virtually all credit unions offer some kind of mortgage financing product. Some offer entire lines of products for qualifying customers. Talk about the options with the bank manager you have befriended and see what is available. Then you can set your sights on the option that has the right combination of qualification criteria and benefits alongside the lowest cost.
When you show up to apply for a pre-approved mortgage, bring every piece of official paperwork you can possibly find with you in advance. Get your own copy of your credit report. Get your own copies of your past five years tax returns. If you have a house in mind, bring a picture of it. If you are already working with a broker or agent and you have an offer in mind, get it in writing and bring that too.
While some of this red tape may not necessarily apply to your loan, bringing it with you, preferably in a nice folio of some kind, will make it clear you are both serious and well organized. It may not guarantee you the loan, but if you are a wobbler, the bank manager might tip the scales in your favor with a good word about your dotted i’s and crossed t’s.
Another easily obtained advantage would be for you to see if you can get the basic qualification criteria for your bank or credit union mortgages. If you can match them exactly, you are much less likely to be denied.