What to Know about Preapproval as a First-Time Homebuyer?
You're finally ready to give up renting and buy a home. Whether you've decided to buy a downtown Madison condo, a single-family home in Middleton, or a home on Lake Monona, you want to get preapproved first.
Without preapproval, you'll likely struggle to get an offer accepted. Most real estate agents and home sellers won't take you very seriously until you have a preapproval letter.
Before you go down this road, you should understand a few things. Let's look at a few tips to know about preapproval
Top 5 Tips for First-Time Homebuyers About Preapproval
1. Do it First
Before you do anything else, get preapproved for your mortgage. This means you should do it before shopping online, looking at homes from your car, or even thinking about shopping for a house.
The preapproval will help make it easy to budget for your new home. It will give you an actual amount you can work with and help you start searching within your actual home-buying budget.
2. Prequalified Doesn't Equal Preapproved
You might become prequalified, but don't take this to mean the same thing as preapproved. When you become prequalified, you have submitted financial information to your lender without proof to back it up. This can help give you an idea of what you might qualify for, but it doesn't hold much weight when hunting for a house.
Getting preapproved means your lender has actually verified your financial information. They have done a preliminary assessment. While you're not fully approved, you have submitted the necessary documents to back up your financial situation.
3. Be Prepared with Your Documents
When you're getting preapproved, you want to be prepared to submit proof of employment and income. This may include pay stubs, tax forms, bank statements, and more. Make sure you have these documents ready to go, or the process might drag on longer than you would like.
4. Know the Conditions
Getting preapproved as a first-time homebuyer is vital, but it doesn't give you a guarantee. There will be conditions you have to meet before you will become approved.
A preapproval letter will be delivered to you with four potential statuses:
- Approved with Conditions
If you have been preapproved, it will likely be with conditions. make sure you understand these conditions before you move forward in the process of finding a Madison home to buy.
5. Start Shopping for a Home
Once you're preapproved, you'll have an expiration date. You need to start shopping for a home before your preapproval letter is no longer valid. Commonly, you will have 60 to 90 days from the date you receive your preapproval letter.
If you're a first-time homebuyer and you're ready to stop renting, it's time to get preapproved. Make sure you have a preapproval letter ready to go when you start shopping for your new Madison home. This will be the main leverage you will need to help get your offer accepted. Without it, you will likely struggle to have any offer you submit accepted by the seller.