If you’re thinking of buying a home this spring, today’s housing market can feel like a challenge. With so few homes on the market right now, plus higher mortgage rates, it’s essential to have a firm grasp on your homebuying budget. You’ll also need a sense of determination to find the right house and act quickly when you go to put in an offer. That’s where the power of mortgage pre-approval comes in. It’s one thing you can do before shopping for your new home that gives you some leverage in the transaction.
To understand why it’s such an important step, you need to know what pre-approval is. As part of the process, a lender looks at your finances, credit, and work history to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter that will help you understand how much money you can borrow and, hence, how much house you can afford.
Freddie Mac explains it like this:
“A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. . . . Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”
In other words, mortgage pre-approval gives you critical information about the homebuying process that’ll help you understand how much you may be able to borrow so you have a stronger grasp of your options. And, with higher mortgage rates impacting affordability for many buyers today, a solid understanding of how much you can borrow is even more crucial.
Pre-Approval Helps Show You’re a Serious Buyer
That’s not the only thing pre-approval can do. Another added benefit for a buyer is that it can help a seller feel more confident in your offer because it shows you’re serious about buying their house. And, with sellers seeing a slight increase in the number of offers again this spring, making a strong offer when you find the perfect house is key.
As a recent article from the Wall Street Journal (WSJ) says:
“If you plan to use a mortgage for your home purchase, preapproval should be among the first steps in your search process. Not only can getting preapproved help you zero in on the right price range, but it can give you a leg up on other buyers, too.”
Bottom Line
Getting a mortgage pre-approval is an important first step when you’re buying a home. It lets you know what you can borrow for your loan and shows sellers you’re serious about buying. Connect with a local real estate professional like Bay Shores Real Estate and a trusted lender so you have the tools you need to purchase a home in today’s market.
