You may have heard pre-approval is the first step in home buying.
But why is it so important?
It’s tempting to fall in love with a house that’s outside your budget when looking for home. So, before you start shopping around, it’s helpful to know your price range, what a comfortable monthly mortgage payment is for you, 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:
“Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.”
The pre-approval letter shows sellers you’re a qualified and serious buyer, which can really help you stand out from the crowd in the current ultra-competitive market.
How competitive is today’s market? Extremely – especially among buyers. According to the National Association of Realtors (NAR), homes are receiving an average of 2.9 offers for sellers to negotiate.
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.
Danielle Hale, Chief Economist for realtor.com notes:
“For ‘a buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home.”
You’re going to need guidance to navigate these waters, especially during these times when the market is constantly changing. Not only are Interest rates low but prices are going up, and lending institutions are regularly updating their standards.
Therefore, 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.
To Summarize
A pre-approval letter is a game-changing piece of the homebuying process especially in a competitive market with low inventory. If you’re ready to buy this year, reach out to a local real estate professional (who can also connect you with a trusted lender) before you start searching for a home.
h/t to Keeping Current Matters
