It’s one of the most common home-buyer questions: should I get pre-approved for a mortgage? Here, we’ll discuss the top five benefits of obtaining pre-approval.
Are you ready to dive into the home hunt? If so, there are a few things you can do to pave the way toward a smooth purchase. Finding the right real estate agent is one. Determining your price range is another. But there’s another (very useful) step that many home buyers overlook—especially first-timers. We’re talking about getting pre-approved for a mortgage.
If you’re unsure about whether you need pre-approval, consider these five key benefits of completing the process.
1) Sellers will take you seriously
When you make an offer on a home, the seller wants to know that you intend to cross the finish line. Will you make it to closing—or will you back out of the deal at the last minute?
Pre-approval represents a commitment from a lender to loan you a certain amount in financing. It means a qualified professional has vetted you and (ultimately) decided you’re a good candidate for a mortgage. Pre-approval differs from pre-qualification, which is more of a rough estimate of what you could receive.
From a seller’s perspective, a buyer who’s successfully gone through the pre-approval process is a safer bet than someone who hasn’t.
2) It makes budgeting easier
Budgeting for the future can be tricky—especially when you’re about to make one of the biggest purchases of your life.
The good news? Once you have pre-approval, you’ll know what your borrowing capacity is. From there, you can start planning your monthly mortgage payments—and make an informed decision about how much your down payment should be.
Pre-approval isn’t an absolute guarantee. Things can change between the day you’re pre-approved and the day you’re ready to close on a home (for example, your credit can shift based on your activity). That said, your pre-approval amount should provide a pretty good indication of how much money you’ll have to work with.
3) You’ll waste less time
Pouring over online listings and touring gorgeous homes can be a lot of fun. But it gets old eventually. And when you’re looking at houses you can’t afford, it also gets frustrating.
Unfortunately, many buyers aren’t sure what their price range should be. They waste time looking at properties that cost too much—a surefire recipe for burning out. To avoid finding yourself in this situation, use your pre-approval amount to help you decide on a suitable price range. Keep in mind that you know your expenses better than anyone, and you should factor them in when you create a home-hunting budget.
4) You’re better positioned to negotiate
Are you still asking yourself, should I get pre-approved for a mortgage? If so, consider this. When it comes to buying the home you want, a great offer can get your foot in the door. From there, hopefully, you can move on to the negotiation stage—which can lead to a great deal.
Here’s where pre-approval comes in. When a seller is deciding who to sell to—and which concessions they’re willing to make during negotiations—they look at the whole package. A pre-approval letter can make your offer that much more appealing.
5) It’s a simple process
In our experience, many buyers have some pretty strong misconceptions about the pre-approval process. Let’s clear up one of the most common right now.
Pre-approval isn’t a major commitment. It doesn’t lock you into a mortgage, nor does it mean you have to work with a particular lender. While your pre-approved status will almost certainly help you out during your search, you don’t have to do anything with it once you’ve obtained it.
No aspect of your home hunt should be taken lightly. That said, obtaining pre-approval is a low-risk, high-value step in the purchase process.
Have questions about buying a home? We have the real estate knowledge and local market expertise to answer them. Get in touch to start a discussion about your needs today!