California Mortgage Pre-Approval, and Why It Makes Sense

Do you plan to buy a home in California in 2017? Will you be using a mortgage loan to help finance your purchase? If so, it would be wise to get pre-approved for a mortgage loan before you start house hunting. In this article, we’ll explore the reasons why California mortgage pre-approval is more important than ever.

How Does Mortgage Pre-Approval Work in California?

In California, the mortgage pre-approval usually works like this: The borrower fills out an application form and provides the lender with a variety of financial documents. These documents usually include W-2 forms for the last two years, pay stubs, bank statements, and the last two tax returns. Credit reports and scores are usually part of the pre-approval process as well.

The mortgage lender uses these and other documents to verify the borrower’s income, debts and assets. Based on this review, the lender will pre-approve the borrower for a certain amount.

The loan won’t be fully approved until later on, after the underwriting process. But there are still undeniable benefits to getting pre-approved in California. So let’s talk about those benefits.

It Makes You a More Competitive Home Buyer

The California real estate market is very competitive right now. In many cities and towns, there simply aren’t enough homes on the market to satisfy demand. This forces home buyers to compete, often fiercely, for limited inventory.

In this kind of real estate market, buyers need to have their “ducks in a row,” especially when it comes to financing.

When you submit an offer on a house, the sellers and their listing agent will want to know if you have your financing lined up.

• For cash buyers, they’ll want to see bank statements that verify the money is in the bank.
• For buyers using a mortgage loan, they’ll want to see a pre-approval letter from a lender.

If you don’t have either of these things, you’re essentially an unknown variable. You’re asking the seller to have faith and to trust you. This doesn’t go over so well in a competitive real estate market where there are plenty of other buyers.

There are several reasons why a seller might reject a purchase offer. Here are some of the most common reasons:

• The buyer’s offer was too low.
• The buyer asked for too many contingencies or concessions.
• The buyer doesn’t have their financing figured out yet.

A California mortgage pre-approval can help you avoid the third item on this list. By presenting a pre-approval letter with your offer, you are demonstrating to the seller that (A) you’re a serious buyer and (B) you’re likely to be approved for a loan. This makes you more competitive, which is exactly what you need to succeed in the California real estate market.

A More Efficient House-Hunting Experience

Mortgage pre-approval can also make your house-hunting experience easier and more efficient. Here’s how.

If you start shopping for a home before you’ve spoken to a lender, you might end shopping outside of your price range. For instance, a borrower who is qualified for financing up to $450,000 would be wasting his or her time looking at homes in the $600,000 price range.

This is why it makes sense to get pre-approved on the front end, before shopping for homes. In fact, many real estate agents in California will only work with buyers who have been pre-approved by a mortgage lender. They do this for the same reasons mentioned above.

Pre-approval helps you narrow down the market to the homes you can realistically afford. This saves you time, while increasing your chance for success.

As you can see, there are several reasons to undergo mortgage pre-approval in California. It’s the sensible approach to home buying. And when you consider that the process can be completed in a matter of days — and sometimes within one business day — you have even more reason get pre-approved.