What is Pre-Approval?
Getting a pre-approval before knowing what you’ll be buying is useful to help you find the home you want. It also puts guidelines down on what you can purchase because you’ll know what you’ll be able to afford.
Pre-approval happens when the lender has tentatively agreed to lend you a set amount to purchase a home. It has not gotten to full and final approval.
What you will have is a set amount of money that helps you narrow down your search. When you go to auction, you’ll know what you can afford to bid. This keeps you feeling confident in your choice and also prevents you from overbidding.
It’s important to note that getting a pre-approval isn’t required as part of the home buying process. It helps and makes you look better to a seller, but it isn’t necessary. At the same time, if you make an offer, the seller will know that the chance of successful financing is much higher because you’ve already got the pre-approval.
Having a pre-approval does not, however, guarantee that you’ll get the home or the loan. When you get a pre-approval, you do not go through the entire credit review process as you would with approval in principle. Instead, it only takes a day or two to get, but you’ll still need to provide proof of income.