You may have heard that its important to getpre-approvedfor a mortgage at the beginning of thehomebuyingprocess, but what does that really mean, and why is it so important? Especially in todaysmarket, with rising home prices and high buyer competition, its crucial to have a pre-approval letter prior to making an offer. Heres why.
Being intentional and competitive are musts when buying a home this year. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows sellers youre a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.
With limited housing inventory, there are many more buyers active in the market than there are sellers, and thats creating some serious competition. According to theNational Association of Realtors(NAR), homes today are receiving an average of3.8 offersfor sellers to consider. As a result, bidding wars are still common. Pre-approval gives you an advantage if you get into a multiple-offer scenario, and these days, its likely you will. When a seller knows youre qualified to buy the home, youre in a better position to potentially win the bidding war.
Freddie Macexplains:
By havingapre-approval letter from your lender, youre telling the seller that youre a serious buyer, and youve been pre-approved for a mortgage by your lender for a specific dollar amount. In a true bidding war, your offer will likely get dropped if you dont already have one.
Every step you can take to gain an advantage as a buyer is crucial when todays market is constantlychanging. Interest rates are rising, prices are going up, and lending institutions are regularly updating their standards. Youre going to need guidance to navigate these waters, so its important to have a team of professionals such as a loan officer and a trusted real estate advisor making sure you take the right steps and can show your qualifications as a buyer when 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 homebuying process. Not only does being pre-approved bring clarity to your homebuying budget, but it shows sellers how serious you are about purchasing a home.
