One of the first steps in your homebuying journey is getting pre-approved. To understand why itâ€™s such an important step, you need to understand what pre-approval is and what it does for you. Business Insider explains:
â€œIn 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.â€
Basically, pre-approval gives you critical information about the homebuying process thatâ€™ll help you understand your options and what you may be able to borrow.
How does it work? As part of the pre-approval process, a lender will look at your finances to determine what theyâ€™d be 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. That can make it easier when you set out to search for homes because youâ€™ll know your overall numbers. And with higher mortgage rates impacting affordability for many buyers today, a solid understanding of your numbers is even more important.
Another added benefit is pre-approval can help a seller feel more confident in your offer because it shows youâ€™re serious about buying their house. A recent article from Forbes notes:
â€œFrom the sellerâ€™s perspective, a preapproval [sic] letter from a reputable local lender often can make the difference between accepting and rejecting an offer.â€
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:
â€œPre-approval maximizes the chances youâ€™ll be able to actually close the deal â€“ 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 . . .â€
Getting pre-approved is an important first step towards buying a home. It lets you know what you can borrow and shows sellers youâ€™re serious about purchasing their home. Connect with a local real estate professional and a trusted lender so you have the tools you need to purchase a home in todayâ€™s market.