It’s natural to be excited to start searching the market for Eagle homes for sale. You may already have an idea of what features and amenities you’re looking for in your new home. Before you start attending open houses or reaching out to agents to schedule in-person showings, it’s a good idea to secure a pre-approval letter from a lender. Below are a few of the top reasons why you’ll thank yourself for getting a pre-approval letter before you start seriously shopping for Boise real estate.
What is pre-approval?
A pre-approval letter is a letter that you get from a lender that details the type and amount of loan that you can qualify for. The amount in your pre-approval letter represents a maximum amount, and you don’t have to borrow the full amount if you don’t want to. The letter will also include the interest rate that you would receive on the loan from that particular lender. Different lenders will offer different loan amounts and interest rates, so it’s a good idea to set aside enough time to speak with multiple lenders before you make a final decision about who you’ll work with. A slightly lower interest rate can make a massive difference over the next several years as you work to pay off your mortgage.
What do I need to get a pre-approval letter?
Most lenders will want to know about your current debt-to-income ratio and your credit score during your initial conversation. They may also ask for you to send them recent tax returns or pay stubs so that they can confirm that you have a regular source of income that will allow you to meet your monthly mortgage obligations. Once they have all of this information, they can determine what amount and type of loan are best to offer you. Keep in mind that a pre-approval letter isn’t a guarantee that you’ll be able to receive this loan. After you go under contract to purchase a home, your lender will begin a more detailed underwriting process that includes a complete background check on your financial history to confirm that you don’t have any outstanding liens or open lines of credit that the lender isn’t aware of.
What makes a pre-approval letter important?
Many real estate agents will only work with clients who have a pre-approval letter, and some sellers won’t agree to a deal to sell you a home unless you can prove that you have pre-approval for a loan at the necessary amount. Having a pre-approval letter also gives you clarity about the price range where you should be shopping. You don’t want to fall in love with a particular property only to realize that you can’t purchase the home because you can’t receive the necessary pre-approval.
Related: How to Buy a House in Boise
What can I do to raise the amount that I’m pre-approved to borrow?
In addition to shopping around with different lenders, you might benefit from providing additional documentation that further explains your financial situation. This is especially helpful if you’re self-employed or if you have other unique financial situations that don’t apply to the typical borrower. Consider sharing profit and loss statements or tax returns from multiple years with your lender so that they can fully understand your financial position. Remember that the loan amount you’re pre-approved for ultimately depends on your lender’s understanding of your financial position, so you’ll benefit from providing evidence that you’re an especially qualified candidate for a loan.
What can I do to improve my interest rate offers?
The best way to improve your interest rate offers is to work on raising your credit score. You can do this by spending less than your maximum credit balance each month and by making sure you pay all your bills on time. You probably won’t see your score jump by 100 points overnight, but you’ll see gradual improvement over time. If you want to save on accrued interest, consider putting down a larger down payment. This reduces the amount that you borrow, thus saving you money on interest.
Does getting a pre-approval letter impact my credit score?
Getting a mortgage pre-approval involves a hard credit inquiry, which will cause your score to drop slightly. Usually, the impact on your score is a drop of five points or less. Hard inquiries will sometimes stay on your credit report for up to two years, but they can become less relevant over time. Keep in mind that your credit score is only one of many factors that impacts your financial position and your ability to qualify for a loan.
When should I begin speaking with lenders?
It’s never too early in the process to begin speaking with lenders about what kind of loan you can qualify for. This will give you additional time to do your own research about the various types of loans that are available for you to use. You’ll also be able to pull together all of the necessary documentation without feeling rushed by the need to purchase a home quickly. You can also speak with more banks and groups if you start the process earlier, which can lead to a better deal since you will have more options to choose from.
Related: Secrets Home Buyers Must Know in 2023
What else can I do to prepare to buy a home?
In addition to getting mortgage pre-approval and setting aside enough money to cover your down payment, it’s also important to find an experienced real estate agent who can help you with your home search. Manda Edge is an expert when it comes to Boise real estate. She works on the King & Edge real estate team, and she has developed a long track record of providing world-class service for each of her clients. They prioritize their clients’ trust and interests above everything else, and they will work hard to ensure your needs are met from start to finish. Reach out to their office when you’re ready to move forward and start seriously shopping for Eagle homes for sale.
