Why Pre-Approval Should Be at the Top of Your Homebuying To-Do List

 

As the supply of homes for sale grows and mortgage rates start to come down, many potential buyers are eyeing the market and wondering if now is the right time to make their move. If you’re one of those people thinking about buying a home, there’s one important step you need to take before you start house hunting: get pre-approved for a mortgage.

Pre-approval is when a lender takes a deep dive into your finances—examining things like your W-2s, tax returns, credit score, and bank statements—to determine how much they’re willing to lend you. After that, you’ll receive a pre-approval letter that shows what you can borrow. Here’s why this step is crucial in today’s market.

1. Pre-Approval Helps You Understand Your Numbers

While home affordability is beginning to show signs of improvement, it’s still tight for many buyers. That’s why it’s essential to talk to a lender about your loan options and how today’s shifting mortgage rates will affect your monthly payment. The pre-approval process is the perfect time to dive into the details.

During pre-approval, your lender helps you figure out how much you can realistically borrow, but even more importantly, you’ll get a clear sense of what you can comfortably afford. As Investopedia explains:

“Consulting with a lender and obtaining a pre-approval letter allows you to discuss loan options and budgeting with the lender; this step can clarify your total house-hunting budget and the monthly mortgage payment you can afford.”

Even though mortgage rates have started to inch down, you want to ensure that you’re not overextending yourself financially. Having this information up front allows you to tailor your home search to what you’re comfortable with, keeping your budget—and your peace of mind—intact.

2. Pre-Approval Makes Your Offer Stand Out

Once you’ve found the right home that fits your budget, having a pre-approval letter gives you a huge advantage when making an offer. Pre-approval shows sellers that you’re a serious buyer who has already undergone the necessary credit and financial checks. It demonstrates that your offer is less likely to fall through due to financing issues, which makes it more appealing in the eyes of the seller.

Greg McBride, Chief Financial Analyst at Bankrate, explains it like this:

“Preapproval carries more weight because it means lenders have actually done more than a cursory review of your credit and your finances, but have instead reviewed your pay stubs, tax returns, and bank statements. A preapproval means you’ve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.”

As mortgage rates continue to decline and more buyers re-enter the market, competition may start to pick up. In this environment, having a pre-approval letter is a way to stack the deck in your favor and make sure you’re in the best position possible to secure the home you love.

Bottom Line

If you’re thinking about buying a home, don’t skip the crucial step of getting pre-approved for a mortgage. It not only helps you understand exactly how much you can borrow, but it also makes your offer more attractive to sellers. Let’s connect and get you on the right track to finding your dream home with confidence! 

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