Do I Need a Mortgage Pre-approval in Miami?

When purchasing a home in Miami, buyers need as many competitive advantages as possible. Unless you make an all-cash offer, you will need a home loan. 

Homeowners in places like South Beach have coveted properties, and sellers will only entertain the best offers. One of the best ways to get your offer accepted on a Miami home is to make an offer with a mortgage pre-approval. 

While you are not legally required to be pre-approved for a mortgage to make an offer on a home, it shows sellers you are serious about buying their home. Plus, it also provides you with a budget for your purchase even if you are just starting your search.

To help buyers understand the basics of pre-approvals, below we've outlined how a pre-approval will make your offer stand out. 

What is a mortgage pre-approval? 

First up, you want to make sure you have an initial understanding of what a pre-approval is. 

Essentially, getting pre-approved means a mortgage provider verifies your assets and income to determine your eligibility for a mortgage, and creates a letter stating the lender backs any offers you make. The dollar amount depends on your income, assets and debts, which the lender will use as a basis to determine the loan amount the mortgage company is willing to provide you. 

You can find several loan programs for home purchases, and each varies depending on your long-term goals. If you aim to live in the home for a long time, you may want to inquire about 30-year fixed-rate mortgages. Consider an adjustable-rate mortgage to achieve a lower payment if the plan is to sell that starter home after only a few years.

Regardless of your choice, having a pre-approval shows sellers you can move quickly through a transaction. But before you start showing up at open houses, you need to find the right lender. 

Shop around for a reasonable rate 

When you look for a real estate agent, you want to interview multiple buyer’s agents to find a good fit. The same is true when you seek financing for a home. 

Different mortgage lenders in Miami can provide a range of mortgage products offering differing mortgage rates for buyers, so it is imperative that you meet with several providers. Picking the first lender you meet means you might miss out on a lower interest rate that competitors can provide. Lower monthly payments are a big windfall, especially when interest rates are higher than they were a year ago.

Make a shortlist of lenders compiled from your research and any recommendations from friends and family. Compare their price quotes and consider your budget for a down payment and closing costs. You do not want to overpay for higher loan processing fees if you can find a more cost-effective lender. 

As you go through the interview process, you will want to organize essential documents to ensure the lender can quickly vet you for pre-approval. 

How to get pre-approved

While it is true that having a pre-approval letter from a lender does give you a leg up, first, you have to go through the process with your mortgage broker or lender. 

The length of time to receive a pre-approval letter depends on your assets, debts, and prior tax history. In Miami, this process can take anywhere from a few days to a week, so organize all your paperwork ahead of time. 

Itemize your real estate holdings and collect your W-2s and other tax documents. Then, you authorize the lender to check your credit score so they can get an idea of your finances and how much you can afford each month in mortgage payments. 

You may even want to get a fully-underwritten pre-approval such that the lender completes the underwriting process before you’ve identified the property. This way, you do not have to wait for a lender to underwrite the loan after the contract is signed, speeding up your ability to close faster.

By the end of the process, you will have a fully-underwritten pre-approval letter that tells sellers you have a lender that has completed pre-underwriting.

How long is a pre-approval letter valid for? 

Depending on the lender you work with, a pre-approval letter is typically valid for 60 to 90 days and includes a specific expiration date. 

Pre-approvals are not loan commitments. A lender will only commit to your mortgage once the lender completes due diligence on the property, including an independent appraisal of the home’s value and proof of clean title. 

Having your agent write up a detailed purchase agreement that includes a financing contingency gives you the legal ability to walk away from the deal if the home does not appraise or the bank does not approve your loan for any reason.