The Benefits of Getting Pre-Approval

If you're looking to buy a home this spring, the current property market can be overwhelming. With so few properties on the market right now, and rising mortgage rates, having a strong handle on your homebuying budget is critical. You'll also need the determination to identify the ideal house and move swiftly when it comes time to make an offer. Getting pre-approved is one thing you can do to help you prepare.

To understand why this is such a vital step, you must first grasp what pre-approval is. A lender will examine your finances as part of the procedure to determine how much money they are willing to lend you. Your lender will then provide you with a pre-approval letter to help you understand 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 basically gives you vital information about the home-buying process that will assist you understand how much you may be able to borrow so you have a better understanding of your possibilities. And, with increasing mortgage rates affecting affordability for many purchasers today, a solid understanding of your figures is even more vital.

Pre-Approval Helps Show You’re a Serious Buyer

Pre-approval isn't the only thing it can do. Another advantage is that it makes the seller feel more secure in your offer because it shows you're serious about purchasing their home. With sellers experiencing a little rise in the number of offers this spring, making a solid offer when you find the perfect house is critical.

As a recent article from the 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.”

Bottom Line

Getting pre-approved is a critical first step in the home-buying process. It tells you how much you can borrow for your loan and demonstrates to sellers that you're serious. Connect with a local real estate expert and a reputable lender to ensure you have the resources you need to buy a property in today's market.