Why Pre-Approval and What You Should Avoid After Applying for a Home loan

When you’re ready to start shopping for a new home, one of your first steps after finding a Napa real estate agent should be reaching out to lenders for a mortgage pre-approval.

Pre-approval letters show sellers you’re financially able to purchase a property. And if you’re competing with a lot of other interested buyers, a pre-approval can move you to the top of the list. Here’s everything you need to know about mortgage pre-approvals, and things you should avoid doing once you apply for a loan.

Realtor Insight on Mortgage Pre-Approvals

As every Napa real estate agent can tell you, getting a mortgage pre-approval can be a game-changer when it comes to closing on your dream home. Aside from letting sellers know you’re a serious buyer, it also lets you know how much you can afford to spend and borrow.

Pre-qualified vs. Pre-Approved

Many people use the terms interchangeably, but there’s a fundamental difference between being pre-qualified and pre-approved for a mortgage.

Pre-qualification is based on information you provide a lender about your finances. It gives you an estimate of what you could potentially borrow and is an opportunity to learn about different mortgage options.

Pre-approval is based on a mortgage application and credit check. The lender issues you a pre-approval letter that states how much it will lend you. Pre-approval letters are usually good for 30 to 90 days.

When to Get a Mortgage Pre-Approval

You can talk to your realtor about when to apply for a pre-approval, but most experts suggest getting one if you’re hoping to make an offer on a home within the next two months. If your home search takes longer and the pre-approval letter expires, the lender might want to update it and pull another credit report.

What to Avoid Doing Once Your Mortgage Is Pre-Approved

There are typically five steps in the mortgage pre-approval process:

1. Comparing lenders
2. Gathering your financial documents
3. Applying for a mortgage loan
4. Learning your credit scores
5. Getting pre-approved.

Once you’ve gotten pre-approved, you want to avoid making any financial decisions that could impact your loan:

• Don’t deposit cash into your bank accounts before discussing how to document it with your lender.
• Don’t make any large purchases like a new vehicle or furniture and appliances for your new home.
• Don’t co-sign other loans for anyone else.
• Don’t transfer your accounts to another financial institution.
• Don’t apply for new credit or close any credit accounts.

Any changes you make could impact your pre-approval status, so be sure to talk about your intentions with the lender who pre-approved you before moving ahead.

Partner With an Experienced Napa CA Realtor

The Napa real estate market is expected to remain strong in the coming months, so you can’t go wrong with getting pre-approved for a mortgage before buying a home here. Talk to one of the experienced agents at St. Helena Real Estate to learn more.