Starting from Pre-Approval

There are a few things you should know if you want to buy a home this fall. With today's mortgage rates and growing housing prices, affordability is a challenge. At the same time, there are a limited number of properties on the market right now, which is causing some buyer competition. There are, however, methods to traverse these waters if you are strategic. The first action will be to obtain mortgage preapproval. You will know your numbers and be able to position yourself for success from the outset of your property search.

What Pre-Approval Does for You

To understand why it’s such an important step, you need to know what pre-approval is. As part of the homebuying process, a lender looks at your finances to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter to help you know how much money you can borrow. Freddie Mac explains it like this:

“A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. . . . Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”

Pre-approval essentially provides you with vital information regarding the homebuying process that will help you understand how much you may be able to borrow. Why is this useful to you, especially now? With increasing mortgage rates and property prices affecting affordability for many buyers right now, a solid understanding of your figures is even more crucial so you can properly grasp your options.

Pre-Approval Helps Show Sellers You’re a Serious Buyer

Let's face it: there are more buyers looking to buy than there are available homes for sale, which creates some competitiveness among homebuyers. When you make an offer on a home, you may find yourself in a multiple-offer situation. However, getting pre-approved for a mortgage can help you stand out from the crowd.

As an article from Wall Street Journal (WSJ) says:

“If you plan to use a mortgage for your home purchase, preapproval should be among the first steps in your search process. Not only can getting preapproved help you zero in on the right price range, but it can give you a leg up on other buyers, too.”

Pre-approval demonstrates to the seller that you are a serious buyer who has already passed a credit and financial check, increasing the likelihood that the sale will proceed without unforeseen delays or financial concerns.

Bottom Line

Getting pre-approved is a critical first step in the home-buying process. The better prepared you are, the more likely you are to receive the home of your dreams. Connect with a reputable lender so you have the resources you need to buy a home in today's market.