A mortgage is not the simplest of loans to secure, and for many home hunters it is the chief area of worry. Finding a property that meets your expectations is a matter of dedicated searching, but that favored property could be gone before the mortgage can be secured. But thanks to the availability of pre-approved home loans, with bad credit borrowers even accommodated, such concerns can be avoided.
There is no shortage of advantages offered by the fact that mortgage loan approval can be granted in advance of actually searching for the property – and we will look at those advantages later. However, it is important to note that there are specific criteria to meet too, and the application process is no shorter.
Even with a 90-day wait, the investment in a home loan that has been pre-approved is likely to be well worth the time taken. But getting pre-approval is not as difficult as some people seem to think. Understanding the key points to the idea is important before submitting an application.
Pre-Approval Process Explained
Getting a pre-approved home loan with bad credit means acquiring confirmation from a mortgage lender that certain mortgage is available to the home hunter. There is no special process needed to secure approval. It simply comes down to applying for the mortgage before searching for a new home.
If the applicant is successful then the mortgage lender will give a letter of confirmation to them. This can then be produced by the borrower (buyer) when they want to confirm that they will purchase the home. It is almost like a receipt showing that the price can be met because mortgage loan approval has already been given.
It is important to reserve at least 60 days (though possibly as many as 90) before starting the search for the new property. But it is important to realize that in securing a home loan in this way, there are distinct advantages to the borrower.
The Key Advantages
So, what are the advantages that make the process so worthwhile? Well, the first is that pre-approval gives the buyer more room for negotiation, and a stronger position when seeking a better deal. This can be of huge benefit, especially to those who have secured pre-approved home loan with bad credit.
This is because when a mortgage is pre-approved, the provider guarantees a certain mortgage sum. This might be $200,000, for example, but the buyer (borrower) may find a home worth $180,000. So, interest is paid on $180,000, rather than the full $200,000.
Thanks to getting advanced mortgage loan approval, confirmation of available funds is immediate. This means that when negotiating the buyer is able to seal the deal practically immediately. Often, property sellers are willing to offer a small discount (perhaps $5,000) for the convenience of getting home loan confirmation so quickly.
Getting Pre-Approval Mortgages Approved
It would be misleading to state that getting a pre-approved home loan with bad credit is very easy, but as with so many loan products, satisfying the key conditions is usually the basis of approval. After all, lenders only want to be sure they will get their money back.
Since a pre-approved mortgage is secured through the same process as a normal mortgage, the conditions that must be met are familiar ones. The only difference between the two processes is the timing. So, employment information, financial and credit status, credit history, list of liabilities and assets are all needed before getting mortgage loan approval.
However, there may be a small extra fee to pay in return for the letter of confirmation, but when it comes to securing the new home of your dreams, the extra cost of getting a pre-approved home loan is well worth it.
By Jenna Finch