Getting pre-approval can be quite challenging for first-home buyers who are usually in the dark about the home loan application process, but doing so with the help of a mortgage broker can make a huge difference.
A pre-approval works like an assurance that a lender can commit to lending you a specific amount of money based on their assessment of your financial health. Having pre-approval puts you head and shoulders above other buyers who are vying for the same property, as the seller is more likely to take you seriously as a buyer.
However, pre-approval is not always reliable, especially if you acquired it through an online portal from your bank. It is still best to get pre-approval from a mortgage broker, who can help you get an estimate of how much you can really borrow when it is time to apply for a home loan approval.
Here are three of the top reasons why you should get pre-approval from mortgage brokers.
1. Brokers have a network of lenders
Given their network of lenders, mortgage brokers will be able to help you determine which banks have the policies that are the right fit for your needs and financial standing. You will never have to worry about finding a suitable lender alone as mortgage brokers can help you narrow down your choices.
While pre-approval provides you with a substantial advantage in the home-buying and loan application process, having multiple pre-approvals does not necessarily mean higher chances of getting approved by your lender. Getting many pre-approvals from several lenders would, in fact, hurt your chances of eventually obtaining approval for a mortgage.
Every pre-approval application gives you a mark on your credit report, and too many marks are seen by potential lenders as a red flag. It is then ideal that you get pre-approval from a lender that is highly likely to give you a thumbs up when you formally apply for a mortgage.
2. Brokers can help you get pre-approval quickly
Mortgage brokers understand the ins and outs of getting pre-approval. They know the requirements and the application process like the back of their hands. This means that a broker can reduce the time and effort it can take for you to get pre-approval. The sooner you get it, the more time you have to look for a property and possibly nab a deal.
When you apply for pre-approval directly from your lender, you will typically get screened using an assessment system it has in place. Your interpretation of your financial standing might be significantly different than what your lender would say.
However, you will get a clearer picture of your position when you apply for pre-approval through a broker. Brokers know the lending policies of the banks in their network, so it will be easier for them to assess your finances and help you determine whether you will be able to meet the requirements.
3. Brokers can boost your chances of getting approved for a mortgage
Obtaining pre-approval does not automatically mean the lender will give you formal approval when you eventually apply for a mortgage. The formal approval of your mortgage will ultimately depend on your current financial health, which comprises your income, credit history, and debts. If there are any changes to your finances during the life of a pre-approval, the estimates of how much you can borrow and even your chances of getting approved may also change.
Mortgage brokers can find a bank that you have a high chance of getting approval from. Furthermore, they can also guide you in maintaining your finances while you are on pre-approval. If you want to get yourself re-assessed, your mortgage broker will be able to check if you are still on the right track.
Is it always better to reach out to brokers?
Mortgage brokers are not always for everyone, especially if it is not your first time applying for a home loan. If you have an existing relationship with a bank or a lender that offers home loans, it can be a great place to start.
However, it is always advisable for first-home buyers to reach out to mortgage brokers for assistance, as they are more likely to be overwhelmed by the sheer amount of offers in the market. A mortgage broker can filter out your options and provide you with the best ones that fit your financial circumstances.
Those who do not want to take on the hassle of asking banks and lenders and understanding all the paperwork needed to get a pre-approval can also seek the help of brokers.
It is a must, however, for anyone using mortgage brokers to always ask questions. While strict regulations and consumer protection laws compel mortgage brokers to act in the client's best interest, it remains crucial for you to understand the rationale behind their every recommendation.