Home Buying Process October 23, 2020

Importance of the home loan pre-approval

A key part of the home buying process is getting “pre-approved” by a lender.  Finding the perfect place with a great real estate agent doesn’t do you a lot of good if you can’t actually buy it!  Most real estate agents will make sure that you have a solid pre-approval in place from a quality lender before they take you on home tours (think of it as your “key” to home shopping), so starting the conversation early on with a lender you trust is critical.  I’d love to talk to you about what a pre-approval is, why it’s not enough just to get the letter, and what characteristics you should be looking for in a lender.

What is a Pre-approval?

What is a “pre-approval”?  In short, a “pre-approval” is just a letter from a lender stating that based on their review of your financial information (your income, assets, and credit) that you should be able to be approved for a mortgage.  The amount of time and effort each lender puts in to making sure your pre-approval is thoroughly vetted and researched can vary dramatically.  A pre-approval letter is not a guarantee that your mortgage gets approved, so working with a lender who you trust to do a thorough job on the front end is critical.  Your real estate agent has likely dealt with a wide variety of different lenders, so ask them about who they trust.


What are your goals?

Getting a pre-approval letter is great, but simply getting a letter saying you should be able to be approved for a mortgage isn’t enough to make sure you’re making a wise financial decision.  If you’re working with a quality lender, they should be asking you questions about what your long and short-term financial goals are.  If you’re not sure what your goals are, they should help you get clarity on them throughout the conversation.

Based on your goals, they should put together multiple strategies that are specific to your situation to review with you and help you compare each strategy.  They should teach you about how each one will play out over time and project the long-term impact of the decision on your overall financial picture.  Your mortgage is going to be your largest debt and will help you buy your largest asset (your home), so making sure your mortgage fits in to your goals is critical.

Written by Josh Gerard
Loan Officer
Churchill Mortgage

You can find Josh’s reviews and contact info here.

Also, if you’re interested about the other steps of the home buying process check out our other blog post Grand Rapids Home Buying Process – Step by Step”