Don't Know Where To Start? Why Pre-Approval is Essential To Your Home Buying Process
Buying a home is likely one of the most significant purchases you will make in your lifetime. There is a lot to consider when weighing such a heavy decision — what neighborhood you want to live in, the home's condition, tax credit incentives, to name a few. It is easy to get lost in a web of Google searches and mortgage calculators when trying to do the research, and it can be overwhelming trying to figure out where to start. If you are serious about looking for a home but afraid to start, getting a pre-approval will be an important first step and will help take the prospect of buying a home from a daydream to reality.
Before we get into the benefits of getting pre-approved, let's start with the basics; what does it mean? Being pre-approved means that a bank or lender has thoroughly investigated your financial history and has agreed to loan you a specified amount of money for your mortgage. This process will take some time. You will need to research lenders, meet with a representative, fill out a mortgage application, and provide several financial documents like tax returns, bank statements, and credit history. Once you complete the process, you will have official approval from that lender to borrow a certain amount of money. Pre-approval is not to be confused with pre-qualification, which is more of a quote from a lender and is not official. Pre-approvals are valid for different lengths of time, depending on your lender, so it is crucial that you receive a pre-approval within an appropriate period when you plan to search for a home.
Why is it important? There are numerous benefits to getting pre-approved before starting your home buying process.
Know How Much You Can Spend
Your lender will let you know how large a loan they are willing to offer you. Having this information is great because it allows you to understand how much money you can spend on a home and will help you narrow down your search. It will also help you avoid putting in a bid on a home outside of your price range, only to find out that you will not be able to secure the needed mortgage.
Lock in an interest rate
Besides providing you with a pre-approved loan amount, your lender will also provide you with a pre-approved interest. Not only will this help you to budget as you consider all costs, but often banks and lenders will even offer a locked-in interest rate for a limited time.
Be a More Competitive Buyer
We are living in a seller's market. The average home on the market receives 3.5 offers a day and is on the market for an average of just 21 days, half of the time of last year's numbers. Pre-approval is an effective way to make yourself a more attractive homebuyer. Sellers will know you are serious about buying and will have confidence in your offer since an official lender has already approved it. It would be devastating to find the home of your dreams in your price range, only to lose the offer to someone else while rushing through the approval process.
Close Faster
There are many elements involved in closing a sale on a home, and the process can take up to 50 days. Having a pre-approved mortgage will allow you to jump ahead to home inspection and appraisal and be just one less thing to worry about during a high-pressure time.
All in all, you have nothing to lose by being pre-approved and everything to gain! There are many lenders out there to choose from, and selecting the right lender will help to ensure you receive the best interest rate possible. That is where I can step in to help. As a realtor working in the Baltimore metro area for the past four years, I have experience with different lenders. I would be happy to help connect you with a lender who will be right for your needs to make this process as smooth as possible. Then when you're ready, we can embark on the journey of looking at homes together with the confidence that you know your spending power.
Feel free to reach out to me anytime through my website or give me a call at (302) 545-8569 and follow my blog for more home buying tips. We’ve got this!