By Daniel Bortz
Getting a mortgage is easy, right? You’ve seen the TV commercials and the billboard ads touting promises like, “Get approved for a mortgage today!” Well, sorry to break the news, but the reality is that obtaining a home loan isn’t just one mouse click or phone call away.
There are a number of hoops to jump through and hurdles to cross before a mortgage lender will issue you a loan. To switch metaphors, it’s less of a sprint, more of a triathlon—and it’s easy to overlook an important stage or two as you move toward the finish line.
Curious what home buyers often miss, much to their chagrin? Here are five essential steps that many people don’t realize are needed for a mortgage.
1. Get pre-approved
In any highly competitive housing market, it’s akin to self-sabotage not to get pre-approved before making an offer on a house.
Pre-approval is a commitment from a lender to provide you with a home loan of up to a certain amount. This will set your home-buying budget, and also show sellers that you’re serious about buying when it comes time to put in an offer. In fact, many sellers will accept offers only from pre-approved buyers, says Ray Rodriguez, New York City regional mortgage sales manager at TD Bank.
Mortgage pre-qualification should not be confused with pre-approval. Pre-qualification is based solely on verbal information you give a lender about your income and savings—meaning that it shows how much you could theoretically borrow. But make no mistake, it’s no guarantee. Pre-approval, on the other hand, means the lender has already done its due diligence and is willing to loan you the money.