Why Get a Pre-Approval FIRST?
A Pre-Approval Matters in a Competitive Market
One of the very first steps a home buyer can make when considering buying a home is to talk with a lender and get a pre-approval. We are asked a lot, why is it so important to get your pre-approval early on in the home buying process? Let’s take a look…
Can You Afford the Home You Want?
When you are considering buying a home, one of the most important first steps is the pre-approval process with your lender.
Think of it like this, if you start looking at homes, you may find one you absolutely fall in love with. You will consciously or sub-consciously measure every other home by this one. What if you can’t be approved for the price of the home? Talk about bursting your bubble!
There really is an order in the process of buying a home. When you follow it, there are less opportunities to be disappointed.
National Statistics & Pre-Approval
Right now – pandemic and all – the National Association of Realtors is reporting that homes on the market are receiving an average of 2.9 offers each. With more buyers than sellers in the market (demand vs supply), this leads to bidding wars with multiple offers and homes selling for more than their listing price.
In central Indiana, we only have .80 Months of inventory of existing homes for sale. That means, if no other homes came on the market, we would sell through our existing inventory in less than a month! That is historically LOW inventory!
When you do find the right home for you, you can put in a competitive offer and be taken seriously by the seller.
Ready & Able to Buy
Buyers need to be prepared when they enter this unprecedented market and one of the best ways is to be pre-approved for a mortgage.
Realtor.com’s recent survey shows buyers are making the mistake of not getting pre-approved right away. Of the over 2,000 active home buyers shopping for a home in the next year, only 52% have gotten their pre-approval.
This means the other 48% will likely be beaten out when trying to write an offer on a home without being approved by a lender. Sellers want to know that you are a serious buyer. Serious buyers don’t skip the pre-approval step!
You will find out how much you are approved for and can decide how much you are comfortable spending monthly and/or on a new home. Sometimes those numbers are different!
After you know this, you can start your home search ready and able to buy your dream home.
What’s a Pre-Qualification (Pre-Qual)?
There are definite differences between the two.
Basically, a pre-qualification is to give you an idea of how much you can borrow so you may decide a budget you want to spend on a home. A pre-qual is given based on consumer supplied information.
A pre-approval is a more in depth step. A consumer still supplies information but this time, a lender will verify it in order to produce a pre-approval.
A pre-approval is best of the two, though we see both everyday.
Order for Success
Maybe you are ready to downsize, getting married, having a child, relocating, have decided you need more space, etc… Set yourself up with the best chance to achieve your goal of buying a home.
Follow the sequence of steps that gives you the best opportunity to win in a Seller’s Market.
- Meet with your REALTOR and plan your strategy
- Meet with your Lender to get pre-approved
- Start Searching for Homes online
- Look at homes in person
- Make an offer
- WIN!!!
Bottom Line
Call your REALTOR and then hook up with a lender. If you don’t have one, your REALTOR will be happy to get you a few recommendations to choose from.
This initial step is necessary to be taken seriously in a Seller’s Market like we are experiencing. Don’t take a chance by skipping this step – you might lose your dream home!
