Why is it so important to be pre-approved in the home buying process?
You may have heard that pre-approval is a great first step in the homebuying process.
But why is it so important? When looking for a home, the temptation to fall in love with a house that’s outside your budget is very real. So, before you start shopping around, it’s helpful to know your price range, what you’re comfortable within a monthly mortgage payment, and ultimately how much money you can borrow for your loan. Pre-approval from a lender is the only way to do this. According to a recent survey from realtor.com, many buyers are making the mistake of skipping the pre-approval step in the homebuying process: This paperwork (the pre-approval letter) shows sellers you’re a qualified buyer, something that can really help you stand out from the crowd in the current ultracompetitive market.
How competitive is today’s market? Extremely – especially among buyers. With limited inventory, there are many more buyers than sellers right now, and that’s fueling the competition. According to the National Association of Realtors (NAR), homes are receiving an average of 2.9 offers for sellers to negotiate, so biding wars are heating up. Pre-approval shows homeowners you’re a serious buyer. It helps you stand out from the crowd if you get into a multiple-offer scenario, and these days, it’s likely. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war and land the home of your dreams. In addition, today’s housing market is also changing from moment to moment. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards.
You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals (a loan officer and a real estate agent) making sure you take the right steps along the way and can show your qualifications as a buyer at the time you find a home to purchase.
Bottom Line
In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. If you’re ready to buy this year, reach out to me and I can connect you with a trusted lender before you start searching for a home.
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