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Be Smart - Get Mortgage Pre-Approval Before You Start Your Home Search



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By : marco benavides    99 or more times read
If youíre a smart home buyer, or if youíd like to become a smart home buyer, one of the best things you can do when you start thinking about buying a home is to get pre-approval for your loan. It is often said that buying a home is the largest investment that most people are going to make. Well, if the saying holds true, then the smarter you are about your investment, the better the return will be in the long run.

If you want to maximize your investment, what can you do? The very first thing that you can do is to get pre-approval. If you are not familiar with the term, pre-approval means that you go to a lender and formally apply for a mortgage loan the same way you would if you were obtaining any other kind of loan. You go ahead and do the loan paperwork, which will include employment history, credit, assets, income, expenses, tax returns, etc.

What pre-approval does for you is that it lets you know how much you can pay for a house. More importantly, it gives you a commitment from the lender for a specific loan amount at a set interest rate for a certain period of time.

Doing your homework is crucial because, since you are going to be a smart shopper, you are going to go to several lenders to see who will give you the best terms on the mortgage. Please keep in mind that lenders and brokers are professionals who make a living from what they do. You must go and try to work out the best deal that you can with them, and always be aware that they are paid to make a profit.

If you have done your homework and shopped around, then you will have a good idea of what the mortgage market is like in the area where you are looking to purchase a home and you will bring this knowledge to the bargaining table when it comes time to go and get pre-approved.

Donít make the mistake of thinking that you are bound to a specific lender if you are pre-approved. Pre-approval is a commitment from the lender to loan you a certain amount of money at a specified interest rate during a certain period of time. It is not a contractual obligation for you to go borrow from the bank.

Having said that, pre-approval does have great advantages, especially with sellers who are looking to move property. If a seller knows that you are pre-approved, the seller will also know that the money is available if you are able to work out a deal. This is where you should once again be a smart investor. Negotiating with a seller is just like negotiating with a bank. It involves give and take. Therefore, donít show all your cards. You can let the seller know you are pre-approved, but donít disclose the exact amount. Find out whether the seller is willing to come down from the asking price and how much. Remember, you are the one who has a pre-approved loan, and you can always go and look at more houses down the block.
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