What You Need to Know to Get Pre-Approval in 2023
One of the first steps in your home-buying journey is getting pre-approved. To understand why it’s such an important step, you need to understand what pre-approval is and what it does for you. Business Insider explains:
“In a preapproval [sic], the lender tells you which types of loans you may be eligible to take out, how much you may be approved to borrow, and what your rate could be.”
Pre-approval gives you important information about the home-buying process, like what your options are and how much you might be able to borrow.
How does it work? As part of the pre-approval process, a lender will look at your finances to figure out how much they are willing to lend you. Your lender will then provide you with a pre-approval letter detailing how much money you can borrow. This can make searching for a property easier, as you will be aware of your whole budget. And with higher mortgage rates impacting affordability for many buyers today, a solid understanding of your numbers is even more important.
Pre-Approval Helps Show You’re a Serious Buyer
Another added benefit is pre-approval can help a seller feel more confident in your offer because it shows you’re serious about buying their house. A recent article from Forbes notes:
“From the seller’s perspective, a preapproval [sic] letter from a reputable local lender often can make the difference between accepting and rejecting an offer.”
This goes to show, even though you may not face the intense bidding wars you saw if you tried to buy during the pandemic, pre-approval is still an important part of making a strong offer. In fact, Christy Bieber, Personal Finance Writer at The Motley Fool explains it may be the most important part of making an offer:
“Pre-approval maximizes the chances you’ll be able to actually close the deal – and sellers want to see that.
The fact that a pre-approval gives you a better chance of getting your offer accepted is undoubtedly the most important reason to complete this step . . .”