When To Get Pre-Approval And What It Is In The First PlaceMarch 12, 2019 1:57 am
Pre-approval sounds a lot scarier of a process than it actually is, explains Alana Mitnick Benjamin, a member of Suburbit’s realtor network and an Associate Real Estate Broker at Daniel Gale Sotheby’s International Realty. While it is cumbersome and involves complete financial transparency, it turns out from start to finish pre-approval shouldn’t take more than a couple of days.
Now that we’ve calmed some of your nerves, let’s start on the journey of what pre-approval actually is and when you should be getting it. Our home-buying expert, Mitnick Benjamin, helped us navigate some of the ins and outs of pre-approval. She also helped debunk one of the largest myths attached to the process (no spoiler alerts – you’ll read more down below).
Read down below for the answers to some of your top questions about pre-approval
What is pre-approval?
In a nutshell, pre-approval is a big check mark that lets everyone from realtors to home sellers know that you mean business and that more importantly you can afford to do business. A mortgage lender will essentially help you pull together all of your financial documents and in turn give you a read not only on what you can afford, but also a breakdown of what you should be budgeting for.
While we’re at it, what is escrow and is it a part of pre-approval?
And, no, we’re not talking about that famous FRIENDS line. Escrow, as explained by Mitnick Benjamin, is when attorneys (the neutral third party in this situation) hold about 10% of your down payment on the home that will be used during closing. The 10% is untouched by anyone and remains in a separate account. It is also pretty far away from anything that has to do with pre-approval and functions more as the seller’s guarantee that you’re as invested in the sell moving forward as they are.
When do I need to get pre-approval?
Mitnick Benjamin recommends getting your pre-approval done by someone you trust as early as possible. Having a clear vision of what you can and cannot afford will make it easier for all parties involved to figure out what kinds of homes are within your budget. Getting it done earlier will also save you the headache of having to see a home you love, slip away – because pre-approval came back and you can’t actually afford it.
Do I need pre-approval to be able to attend open houses?
No! We know that some listings misleadingly note that you have to have a pre-approval in order to see the home, but this isn’t true, says Mitnick Benjamin. While the pre-approval would definitely help with the process, nothing about it is necessary to start seeing homes.
We know the homebuying process can be intimidating, but the more information (and home-shopping vocabulary) you’re able to add to your back pocket, the better.
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