Are you thinking of making a big purchase? Something like real estate or a brand-new car? If yes, then you have probably thought of getting a mortgage or any other loan to help finance the purchase.
In case you don't know, getting a loan is ideal for those who need a large sum of money but need the means to pay for it outright. A loan is also a good way to finance a purchase over time without putting the entire purchase price on your credit card.
When it comes to loans, there are a few different types to choose from, and one popular loan type is the pre-approved loan.
What Is a Pre-approved Loan?
A pre-approved loan is a type of loan that people apply for when they're looking to borrow a specific sum of money. This type of loan differs from other loans because it doesn't demand a full credit check or verification of the asset.
To be pre-approved for a loan, you must provide the lender with basic data about yourself, such as your name, address, and income. Once you've been pre-approved, the lender will give you a specific loan amount that you're eligible for. This amount is usually based on your income and credit score.
For instance, if your mortgage loan calculator shows you can provide a monthly mortgage payment of $1,000, a pre-approved loan could offer you a borrowing limit of $100,000.
Why It’s Necessary to Have a Pre-approved Loan
The main benefit of receiving pre-approval is the confidence that you are likely to be accepted for a mortgage. It provides you with precise instructions on how much money you may spend.
Other perks of your pre-approval include the following:
- Getting a pre-approval lasts up to 3 months, so there is plenty of time to find the right home.
- A pre-approval allows you to shop around confidently, knowing you have a financing commitment.
- A pre-approval letter also signals sellers that you are a serious, qualified buyer.
- If you find the perfect home but it's out of your price range, your pre-approval may help you get the seller to consider your offer.
The Conditions of Pre-approval
You have a choice between two methods for pre-approval. The first would be through digital platforms, where you fill out an online form, and the other is by meeting a loan officer in person.
The pre-approval process usually takes a few minutes to a few hours, and the pre-approval conditions will be based on the information you provide. In addition, your pre-approval letter will state the maximum amount you are approved for, the interest rate you are offered, and the loan term.
However, keep in mind that pre-approval is not a guarantee for a loan. Your loan is still subject to final approval, and the interest rate and terms may change based on the mortgage loan calculator. Besides, the lender may require a full application and credit check before approving your loan.
Final Thoughts
Obtaining a pre-approved loan is an important step in the home-buying process. It lets buyers know how much they can afford and can help them stay within their budget. In addition, buyers may start browsing for houses that meet their budget, which gives them a head start on the home-buying process.
Wealthy You is an Australian mortgage loan company that provides mortgage solutions to aid your pre-approval and home-buying process. Get in touch with us to learn more about our products and services!
