A First Time Home Buyer's Guide to Mortgage Preapproval

Buying a house for the first time is an exciting chapter in everyone's lives. But that doesn't mean it's easy! After all, buying a home isn't as simple as picking one you like and writing a check. It's a lengthy process of budget calculations, showings, loans, negotiations, and lots of paperwork. One of the most important steps in the home buying process, and one that first time buyers often aren't aware of, is applying for mortgage preapproval.

What is mortgage preapproval? Keep reading to learn all about what it is and how it can help you buy your first home in the Twin Cities metro.

How Mortgage Preapproval Works

In case you're fuzzy on the terminology, a mortgage loan is a specific amount of money that home buyers can borrow from a lender in order to pay for a house. Over a predetermined period of time, you'll have to pay back the money you borrowed along with interest; the amount of interest you have to pay each month is known as the mortgage rate. You can apply for a mortgage loan with many types of lenders, including banks, credit unions and government agencies. Approval for a mortgage will be largely dependent on your credit score and other financial records. This is where mortgage preapproval comes into play.

Mortgage preapproval is a huge benefit to first time home buyers in Minnesota because it allows you to find out whether or not you'll be able to afford the house you want in advance. When you apply for mortgage preapproval with a bank or other lender, they'll review your credit score, tax records and annual income to determine whether or not they'd be willing to trust you with the loan you need. It is always a good idea to apply for mortgage preapproval with several different lenders to find out which of them is willing to give you the loan with the best terms.

If you are accepted for mortgage preapproval, the lender will send you a letter confirming your approval and letting you know how long you will have to take out a loan in the amount that you are asking for before you need to reapply. The offer extended by the preapproval letter may vary between lenders, but will usually be a period of 30 to 90 days.

When buying a home in the Twin Cities, you can present this preapproval letter to the seller as proof that you are able to afford their asking price. This is beneficial in a competitive housing market because it allows you to reassure a seller immediately that you can follow through on your offer, making them more likely to accept. If you make an offer and only then seek mortgage approval, the process can take well over a week. In that time, a better offer may come along which the seller accepts, and you'll lose out on your dream home. Mortgage preapproval is one of the best ways to show your commitment to buying a home, which is why it is strongly recommended for all first-time home buyers.

Looking for Mortgage Lender Recommendations in MN?

If you need help finding a reputable local mortgage lender - or any other help with buying a home - a real estate agent will be your best friend. Give the Chris Fritch Team with eXp Realty a call today if you'd like to work with us to buy a new home in the greater Twin Cities area!