5 Reasons For Home Buyers to Get Pre-Approved

Has your realtor advised you to get pre-approved for a mortgage BEFORE you start looking at homes? Here are 5 reasons why you should take their advice!

1. Know how much home you can afford!

Don’t waste time looking at homes in the wrong price range.  Buyers are often surprised that they can afford more or less than they think.  You don’t want to find your dream home only to find out you can’t qualify for the loan. Or,  the opposite could happen. You can go after the desired neighborhood you thought you could never afford.  The pre-approval process will give you an idea of how much you can borrow, what type of loans you can qualify for and at what percentage rate.  This can help you determine your monthly payment and see if it’s a comfortable number that works within your budget.

2. Shows the seller you have buying power

Unless you are paying cash, consider your pre-approval letter as a stamp of approval.  Without it, the seller has no idea whether or not you can secure a loan to back your offer. The pre-approval letter validates to the seller that a lender is willing to lend you the money needed to purchase the home. This is especially important in a sellers’ market when there are multiple offers at once.  The seller will be comparing offers to look at the best terms and removing ones that show any risk of the deal falling through.  Ensure your offer makes the cut and ensure it is competitive by reducing that risk!

3. Uncover potential credit problems

There are multiple reasons why a lender may not be able to loan you money. Maybe you have a low credit score, no credit score at all, or there is a ding on your credit that is false or you didn’t know about.  It’s also possible your debt-to-income ratio is too high, and you can’t qualify for a particular type of loan. Getting pre-approved can identify any of these credit issues early on, giving you the opportunity to resolve the problem before falling in love with a home.  Don’t wait to find these things out at the last minute when you are putting in an offer.  By finding out in advance, your lender can advise you on the best solutions to build or repair your credit, give you a checklist of what needs to be done, or seek other lending avenues that may be best for your situation.

4. Shows you are a serious buyer

Pre-covid, pre-approval letters were most oftentimes not required to tour a home.  Once the pandemic hit, many realtors’ associations put rules in place to limit showings to only serious buyers to alleviate sellers’ homes being subject to people coming through “just to look”.  This practice has stuck even as we see the pandemic start to fade. A buyer who has gone through the process of getting pre-approved is most likely going to purchase a home eventually and will be taken more seriously by the sellers and real estate agents involved.

5. You can act fast! 

In our current sellers’ market, time is of the essence as buyers are lined up to see a home right when it is available. Don’t get beat out because you still have to call a lender to find out if you are even qualified.  Being pre-approved means you can close on a loan faster. You have already started the process, established a relationship with the lender and have the proper type of financing secured.  Now you can focus on the other steps such as ordering the appraisal and home inspection which will ultimately allow you to get into your home more quickly!  Many times a quicker close is appealing to the seller as well,  which can make your offer even more competitive…it’s a win-win!

Nikki Rayne