In today’s time and age, everything has gone up thanks to the rising demand for everything – which has caused a steady increase in inflation since the time wherein our parents or the older members of our family bought the house we live in.
Because of this, as you start your adult life and begin making purchases such as a car, a house, and the like, you’ll be disheartened to see that prices are near impossible for a middle-class earner’s wage. This is where loans and mortgages come in!
Loans and mortgages are lending agreements entered between individuals planning to buy a property and a bank, organization, or federal institution. These loans and mortgages stretch out the sum of the property you wish to buy along with interest and make the repayment more manageable. Having a loan or a mortgage allows individuals to purchase what they need even if they do not have the financial capacity or the liquid means to pay for the HUGE lump sum that properties cost nowadays.
Now, loans and mortgages can be applied for, and usually takes between a few weeks to a few months for approval or disapproval depending on factors such as a person’s debt, earning capacity, and the like. However, there is one easy step that will save you the hassle of undergoing a tedious application process that will delay you from being able to purchase and live in your home sweet home: a loan pre-approval.
What is a loan pre-approval?
A Pre-approved loan is when lenders such as banks approach you before you approach them with an offer to give you a loan for you to be able to purchase a property. These financial institutions such as banks, organizations, and the like have a running tally of everyone’s financial expenses. With this, a pre-approved loan is determined by banks usually when they see that someone has had a stellar financial history in the past few years.
In this case, a stellar financial history means a high credit score. A high credit score simultaneously confirms all the factors that they look into when one applies for a loan. A high credit score means you are not under a significant amount of debt, are on time with your payments with your other financial liabilities such as a car loan, education plan, or student loan, and you are earning a steady income that will likely continue for the foreseeable future.
A decent credit score that all may aim for when having their credit checked would be making sure they get somewhere along 680 to the high 700s and if possible, even 800 – this means that their financial state is sound and that their paying capacity is high.
Now, why is having a high credit score and gaining a pre-approval important?
Getting a high credit score that leads to a loan pre-approval offer means that you skip the tediousness of applying for a loan! More than this, pre-approved loans usually have more agreeable terms and lesser interest rates which means that you’ll be getting more value out of your money.
One important thing to note last but not least, is when you do get your credit score up and when you do get a pre-approved loan offer, be mindful that this offer is not forever – these kinds of offers are usually offered only as a promo and for a limited only and the best advice would be to grab the chance and take the loan once it is offered, as long as the terms are agreeable of course!
As an end note, if you’re wondering how banks earn by actively seeking out individuals and inviting them to use the bank’s money to purchase properties at a reduced interest rate, the answer is that the security of the individual having a high credit score means that it is almost a sure way of getting their money on time according to the loan’s payment plan.
Remember, the only assurance most banks and financial institutions will ever need from you when it comes to anything financial is for you to have a good credit score; having a good credit score opens so many doors and possibilities so work on increasing your score and maintaining it as much as you can.