What is Preapproval for a Mortgage?

dv1064020So, you have decided to buy a house. You have been renting for long enough, and you want to have a place to call your own. You have been saving for years for the down payment, your credit is in good shape, and you have enough income to comfortably make the payments on a mortgage.

So, you go out and start house hunting. You see a bunch of homes, and finally, find one that you love. You put in an offer, but wait a minute – you haven’t been approved for a mortgage yet. The buyer gets a competing offer, and the other person is preapproved. Everything else being equal, the home owner is going to pick the other offer, every time.

Preapproval is simply a mortgage company agreeing, in principle, to approve you for a mortgage, up to a certain amount. What that amount is will depend on a few factors, but the important thing is, it will give you some idea of what your budget should be, and show a prospective seller that you are serious about your offer. And the next time you place a bid on a house, you will be the one whose offer looks better for doing that little bit of pre-planning.

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