How Important Is Pre-approval on your Homebuying Journey

If you're planning to buy a home this year, one of the first steps on your journey is getting pre-approved. Buying a house can be an overwhelming process—especially in today’s market where mortgage rates are higher than they were just a few months ago—but if you get pre-approved before looking for homes it will make things much easier. Here's why:

What Is Pre-Approval?

To understand the importance of pre-approval, it’s helpful to know what it is. The Mortgage Reports explains it like this:

“When you’re ready to take the leap into homeownership, your first step is mortgage preapproval. . . . A mortgage preapproval is when a lender determines you’re qualified for a home loan. Your preapproval letter shows the maximum loan amount you’re approved for (your home buying budget), as well as the specific interest rate and loan term you can expect.”

During the pre-approval process, a lender will look at your finances and determine what amount they would be willing to loan you. Once that is determined, you'll receive a letter from the lender informing you of how much money—and any restrictions associated with it (such as whether more funds can be borrowed later on). That can make it easier when you set out to search for homes because you’ll know your overall numbers. And with mortgage rates rising and impacting affordability—and knowing how much house one can afford is more important than ever

Pre-Approval Can Signal You’re a Serious Buyer

In addition, getting pre-approval indicates that you are ready to buy a home. A recent article from realtor.com notes:

". . . getting pre-approved can actually improve your chances of falling into the sellers’ good graces, and you’ll want to get it done as early as you possibly can in the home-buying process."

Although bidding wars are easing this year as the market shifts, preapproval is still an important part of making a strong offer. It shows sellers that you're serious about their home and makes them feel more confident in your ability to complete the transaction.

Bottom Line

Pre-approval for a mortgage is critical: it helps you understand what loan amount you can qualify for, and shows sellers that you’re serious about buying their home. Connect with The Perreault Group and a trusted lender so you'll have the tools you need to succeed as a homebuyer in today's market.