According to a recent survey from Realtor.com, nearly half of all home buyers are missing a crucial step when they begin their home search: the pre-approval letter. Only 52% of buyers obtained a pre-approval letter before viewing homes. Here are four reasons pre-approval from a lender is so important as a first step in home buying.
1. Competitive advantage. You need pre-approval to be competitive with other buyers. No one wants to lose their dream home to someone else. Being outbid is one thing, but sometimes sellers with multiple offers don’t choose the highest bidder. They want assurance that the home will sell on time and the deal won’t fall through. Say your competition bid $1,000 below you and is already pre-approved by a lender, but you haven’t gone through the approval process yet. The other buyer often is a more solid choice in the seller’s eyes. No matter how certain you are about your finances, without a pre-approval letter, the seller doesn’t have any assurance that you’re qualified to buy their home.
2. Confirm affordability and save time. The pre-approval process confirms what you can afford. Instead of wasting time viewing homes that are too pricey, you can focus on ones within your financial reach. Also, your Realtor can provide better service by putting you on automated new listings notifications that show homes within your price range. There’s no use falling in love with a property that you can’t afford.
3. Gain confidence. Sometimes couples have unrealistic expectations for what they can afford. Even those who are confident in their finances might find that a lender requires them to have been in the same job for at least two years to prove stability of income. If they’ve just started a new job, they may not qualify for the amount they want. Others may be unsure of their affordability and going through pre-approval with a lender reveals an accurate price range. Once you’ve been through the process, you gain confidence in your financial position for a home purchase.
4. Close faster. Generally, waiting for mortgage approval in a home transaction takes more time than any other contingency. If you’re already pre-approved, the lender can speed up the closing process and order an appraisal of the new home. If you or the seller needs a closing in less than 30-45 days, pre-approval makes it more likely to happen because your finances have already been reviewed.
The pre-approval process is game changing to home buyers, especially in a competitive market with buyers bidding against one another. Today’s market is rapidly changing as interest rates are low, prices are going up, and lending institutions are regularly updating their standards. It’s important to have a team of professionals on your side. When you’re ready to buy, reach out to us at Platinum Service Realty. We can even connect you to a trusted lender.
Real Estate Term of the Week
Pre-approval Letter: Provides documentation of exactly how much mortgage a home buyer has been approved to borrow. This documented evidence shows both Realtors and sellers that a buyer is serious in their pursuit of a property.