One of the first steps in your homebuying journey should be getting pre-approved for your mortgage. To understand why it’s such an important step, you need to understand what pre-approval is and what it does for you.
A preapproval involves a mortgage lender advising you on what types of loans you qualify for, how much you may be approved to borrow, and what interest rate you might pay.
Basically, pre-approval gives you critical information about the homebuying process that will help you understand your options.
How does it work? As part of the pre-approval process, a lender will look at your finances, credit and other financial information to determine what they would be willing to loan you. They calculate in the current mortgage interest rates and give you a pre-approval letter to help you understand how much money you can borrow. When you begin to search for homes, you’ll know what you can afford and be able to adjust your search appropriately. With higher mortgage rates impacting affordability for many buyers today, a solid understanding of your numbers is critical.
Another added benefit is that a pre-approval helps a seller feel more confident in your offer . It shows you are serious about buying their house.
“From the seller’s perspective, a preapproval letter from a reputable local lender often can make the difference between accepting and rejecting an offer,” according to a recent Forbes article.
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, stated that it may be the most important part of making an offer.
“Pre-approval maximizes the chances you’ll be able to actually close the deal, 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 … ”
The bottom line is that getting pre-approved is an important first step towards buying a home. It lets you know what you can borrow and shows sellers you’re serious about purchasing their home. Connect with me to begin creating your home-buying plan and for a free copy of my Buyer’s Guide for more tips on getting you home! Karen Daugerdas, Coldwell Banker REALTOR®.