The Power of Pre-Approval
If you are looking for a residence this spring, you may find the current housing market difficult. With so few homes available and mortgage rates that have rising and falling in between 6% - 7%, it is crucial to have a firm grasp on your budget for purchasing a home. You will also need determination to find the perfect home and respond quickly when the time comes to make an offer. Obtaining pre-approval is one way to better prepare yourself.
To comprehend why this phase is so crucial, it is necessary to understand pre-approval. A lender evaluates your financial standing to determine the amount of money they are willing to lend you. Then, your lender will provide you with a letter of pre-approval that specifies the amount of money you can acquire.
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 essence, pre-approval provides crucial information about the home buying process that will help you determine how much you may be able to finance, thereby enhancing your understanding of your options. And with higher mortgage rates affecting the affordability of many buyers today, it is even more important to have a firm understanding of your numbers.
Pre-approval Demonstrates Your Seriousness As A Buyer
That is not the only benefit of pre-approval. It can also increase the seller's confidence in your offer because it demonstrates that you are sincere about purchasing their home. And with sellers experiencing a slight increase in the number of offers again this spring, it is essential to make a competitive offer when you discover the ideal home.
According to a recent Wall Street Journal (WSJ) article,
“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.”
Obtaining pre-approval is a crucial first step when purchasing a home. It helps you know how much you can borrow and demonstrates your seriousness to sellers. Connect with a local real estate agent and a reliable lender so you have the resources necessary to purchase a home in the current market.
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Author Steven M Vertz
Wizards of Real Estate LLC