Why Is Pre-Approval a Game Changer in Homebuying?
If you are thinking about buying a home, pre-approval is an important step you should not skip. So, before you start fantasizing about your new living room or dining on your future all-season patio, make sure you are working with a reputable lender to prioritize this critical step. Here’s why.
While home price growth is slowing and mortgage rates have been falling in recent weeks, affordability remains a concern. At the same time, there are a limited number of homes for sale right now, which means that there is constant competition among prospective buyers. There are, however, ways to navigate these waters if you are strategic, and pre-approval is the game changer.
What Pre-Approval Does for You
To understand why it’s such an important step, you need to know more about pre-approval. As part of the homebuying process, a lender looks at your finances to determine what they’re willing to loan you. From there, your lender will give you 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.”
Getting pre-approved puts you in the mindset of looking at the big picture, one step at a time. And the key is more than simply obtaining a pre-approval letter from your lender. Pre-approval combined with strategic budgeting is your golden ticket to understanding what you can actually afford. It protects you from future heartbreak by preventing you from falling in love with a house that is out of your price range.
Pre-Approval Helps Show Sellers You’re a Serious Buyer
But that is just the start. Let us face it: there are more people looking to buy than there are available homes for sale, creating competition among homebuyers. That means you may find yourself in a multiple-offer situation when it comes time to make your move. Getting pre-approved for a mortgage, on the other hand, can help you stand out from other buyers.
In today's fast-moving housing market, having that pre-approval in your back pocket can be your secret weapon. When sellers see you're pre-approved, it tells them you're a strategic and serious buyer. In a world of multiple offers, that's a big deal. As an 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.”
Pre-approval shows sellers you’re more than just a window shopper. You are a buyer who has already undergone a credit and financial check, which increases the likelihood that the sale will proceed without unexpected delays or issues. Sellers appreciate this because it establishes your offer as trustworthy. Is not this a win-win situation?
So, before you start mentally arranging furniture in your dream home, work with a reputable lender to secure a pre-approval. It will save you time, stress, and a lot of headaches that would otherwise occur. The truth is that the better prepared you are, the more likely you are to get the house of your dreams.