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5 Ways Getting Preapproved for a Home Loan Can Benefit You

May 02, 2023
Living room at Midhurst Valley by Brookfield Residential in Midhurst Ontario

When preparing to shop for a new home, getting preapproved for a home loan can help make the shopping process smoother. Getting preapproved for a house loan is essential to any home financing process today.

Mortgage preapproval can save you a lot of potential disappointment. For example, say that you’ve found a new home you love and plan to buy, only to learn when you apply for the mortgage you don’t qualify to borrow what the home costs.

Preapproval doesn’t guarantee a home loan amount. Instead, it accurately estimates your interest rate and borrowing amount. If your financial situation changes substantially between the preapproval and the actual purchase time, your preapproval and the amount you expect to borrow can change.

Following are some benefits of seeking mortgage preapproval before you begin your home search.

1. You’ll Know How Much Home You Can Afford

Getting preapproved for a house loan helps you understand how much home you can afford before you begin your new home search. This lets you focus on looking for homes that fit your new home budget. Lenders look at many things to determine the loan amount for which you may be approved, such as your income, expenses, and ability to pay off a mortgage over time.

It is helpful to use a mortgage calculator to get a feel for how much you can afford based on the price of the home, your down payment, and interest rates.

2. Mortgage Preapproval Can Streamlines Your Home Search

With preapproval, you can take a practical approach to shopping for a home. You’ll have a clear view of what exactly you can afford. You can focus on homes that are part of that price range, which helps you save precious time and energy in your search.

You can skip seeing homes that aren’t a realistic part of your homebuying capabilities. You’ll be armed with confirmation that you have the means to shop for homes at a certain price, which can help make the homebuying process easier and more enjoyable.

3. Mortgage Preapproval Helps You Shop Confidently

Buying a home is one of the biggest investments most people make in their lives. A study of 2,000 Americans by SWNS Media Group in 2021 found that:

  • 44% of homebuyers reported feeling nervous throughout the homebuying process.
  • Two-in-five homebuyers said that purchasing a new home was the “most stressful event in modern life.”

Getting preapproval for a mortgage can provide you with peace of mind. You’ve taken a smart first step in the homebuying process by talking with a lender to understand what fits your budget. You can feel confident every home you visit is one you’ll likely be able to afford, based on your preapproval terms.

4. Mortgage Preapproval Shows Sellers You’re Qualified

Getting preapproved for a house loan can also help increase your standing among other homebuyers. When several homebuyers are interested in a home, your preapproval shows sellers you’re serious and have the means to follow through on the purchase.

Some home sellers will only consider offers that are backed by proof of preapproval. Sellers may tend to decline offers that don’t have a preapproval letter attached.

When you find a home you want to put an offer on, but you don’t have preapproval, the delay in getting approved could be enough time for the house you want to be sold to another homebuyer. For homes with a lot of prospective buyer competition, preapproval can help your offer get considered before others that don’t have it.

5. Mortgage Preapproval May Help You Land a Home Loan Quicker

When you’re ready to make an offer on a home and complete the homebuying process, preapproval usually helps streamline the home loan process with your lender. Instead of starting the home loan process from scratch, you’ll only need to complete the final approval process to obtain the loan.

When you want to buy and move into a home quickly, preapproval can speed up the entire homebuying process. This may also appeal to sellers who want to close quickly, increasing the chances of them accepting your offer over that of someone else.

Typical Steps in the Loan Preapproval Process

The preapproval process begins with visiting a lender or applying for preapproval with a lender online, such as BRP Home Mortgage in the U.S. – The steps for how to get preapproved for a house loan include:

  • Choosing a mortgage lender you’d like to work with. Home builders will often be able to recommend a list of providers or offer their own.
  • Gathering the required documents you’ll need for home loan preapproval. The lender will tell you which documents you’ll need to collect. These generally include:
    • Identification documentation
    • Pay stubs verifying your current income
    • Bank statements, tax returns, and W-2 forms from at least the past two years
    • Investment account statements and rental information if you’re currently renting
    • A lender will also typically look at your credit score and career history when determining preapproval terms.

Mortgage Preapproval Sets Up Homebuyers for Success

Mortgage preapproval is a low-risk way to start your homebuying process with confidence. You’ll get a precise understanding of how much home you can afford. When you find a home you’re interested in, preapproval helps solidify your position as a strong homebuyer candidate.

If you're ready to take the next step in purchasing your new Brookfield Residential home, head to BRP Home Mortgage to begin your pre-qualification. You can also reach out to your local Brookfield Residential team members, who are ready to help guide you through the entire home buying process. Contact us today!