The Importance of Mortgage Pre-Approval in Today’s Market
During the home-buying process, you should find a property you like and then get a mortgage pre-approval, right? Not exactly. While both of those are important steps in your journey, getting pre-approved needs to be at the top of your homebuyer’s to-do list, especially in the current market.
Without a pre-approval letter, you run the risk of missing out on your dream home. Even worse, you may waste your time looking at properties that aren’t a good fit based on your financial goals and purchasing power. With that in mind, here’s everything you need to know.
The Importance of Mortgage Pre-Approval in Today’s Market
During the home-buying process, you should find a property you like and then get a mortgage pre-approval, right? Not exactly. While both of those are important steps in your journey, getting pre-approved needs to be at the top of your homebuyer’s to-do list, especially in the current market.
Without a pre-approval letter, you run the risk of missing out on your dream home. Even worse, you may waste your time looking at properties that aren’t a good fit based on your financial goals and purchasing power. With that in mind, here’s everything you need to know.
What’s a Mortgage Pre-Approval?
A mortgage-pre approval, also known as a pre-approval letter, is issued by a lender and states how much they are willing to let you borrow to purchase a home. Keep in mind that this letter doesn’t guarantee they’ll give you a loan.
Think of it as a preliminary screening process to determine how much you qualify for. It’s like the lender is saying, “Based on what we know right now, you can borrow this much to purchase a home.”
If you want your pre-approval to be accurate, you must be honest about your debts, income, assets, and financial health. Otherwise, the lender may reduce the amount you are qualified for or, worse, withdraw the letter altogether.
Why You Need Pre-Approval in the Current Market
With a mortgage pre-approval, you can:
Put in an Offer Right Away
In recent years, sellers received an average of five offers. Some homes may only receive one or two offers, while others might get a dozen or more. The point is, you never know what sort of attention the property you like will get. If it’s a great deal, you can bet the sellers will receive more than one bid.
So what’s that got to do with your mortgage pre-approval? Everything! Your real estate agent won’t (nor should they) submit an offer on a home without ensuring you are pre-approved. By the time you get your letter, the seller may have already accepted another contract.
If you’ve taken care of the lender side, a good agent can submit an offer within a few hours of showing you a home. This gives you a better chance of landing the property you like.
See Homes
Technically speaking, you can look at homes without a pre-approval. However, many agents won’t schedule showings if you haven’t provided them with a letter. Even if your agent is willing to take you to see properties, the listing agents who represent the sellers might deny the showing requests without your letter
Understand Your Budget
During the vetting process, a lender will determine how much you can borrow. They will also provide you with a rough estimate of your monthly mortgage payment if you borrow the maximum they’ll allow.
Keep in mind that this estimate can vary slightly depending on the purchase price, interest rate, and property taxes associated with the home you buy. Still, the figures the lender provides offer a good baseline to guide your home search. For example, if you get approved for $350,000, you should focus on homes that are at or below that price point.
Expedite the Closing Process
The best lenders perform important due diligence during the mortgage pre-approval process. As a result, they will already have many of the forms they need to get you to the closing table. Supporting your offer with strong financing can help you stand out to sellers and increase your odds of landing your dream home.
Ready to Get Pre-Approved? Here’s What to Do Next
Step one involves connecting with a reputable mortgage team that cares about providing you with a frictionless experience. Partners like Summit Mortgage help you explore your options and choose the best loan type for your unique situation. If you are ready to become a homeowner, get pre-approved with our team and start shopping!
