Why Is It so Important to Be Pre-Approved in the Homebuying Process?

You may have heard that pre-approval is a great  first step  in the homebuying process. But why is it so important? When looking for a home, the temptation to fall in love with a house that’s outside your budget is very real. So, before you start shopping around, it’s helpful to know your price range, what you’re comfortable within a monthly mortgage payment, and ultimately how much money you can borrow for your loan. Pre-approval from a lender is the only way to do this. According to a recent  survey  from  realtor.com,  many buyers are making the mistake of skipping the pre-approval step in the homebuying process: “Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months,  only 52% obtained a pre-approval letter before

beginning their home search , which means nearly half of home buyers are  missing this crucial piece of paperwork. ” This paperwork (the pre-approval letter) shows sellers you’re a qualified buyer, something that can really help you stand out from the crowd in the current ultra-competitive market. How competitive is today’s market? Extremely – especially among buyers. With limited  inventory , there are many more buyers than sellers right now, and that’s fueling the competition. According to the  National Association of Realtors  (NAR), homes are receiving an average of  2.9 offers  for sellers to negotiate, so  bidding wars  are heating up. Pre-approval shows homeowners you’re a serious buyer. It helps you stand out from the crowd if you get into a

multiple-offer scenario, and these days, it’s likely. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war and land the home of your dreams. Danielle Hale , Chief Economist  for  realtor.com  notes: “For ‘a buyer in a competitive market, it’s  typically essential to have pre-approval done  in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home.’” In addition, today’s housing market is also changing from moment to moment.  Interest rates  are low,  prices  are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to

navigate these waters, so it’s important to have a team of professionals (a loan officer and a real estate agent) making sure you take the right steps along the way and can show your qualifications as a buyer at the time you find a home to purchase. Bottom Line In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the home-buying process. If you’re ready to buy this year, let’s connect before you start searching for a home.