Why Do I Need To Be Pre-Approved For a Loan Before Looking at Homes?
The most enjoyable part of finding a new home is going out with a real estate agent and actually walking through homes. Since this is the part of the home buying process most buyers look forward to most, it is not surprising that buyers are in a hurry to go out and look at homes. However, it is crucial for a buyer to be pre- approved with a reputable lender before doing so.
Offers more likely to be consider/accepted
The Denver metro area is currently in what is known an extreme seller’s market. Simply put, there are more buyers looking for homes than there are homes for them to buy. This creates and extremely competitive market amongst buyers. Most homes in the Denver metro area are going under contract in just a few days after being listed and after receiving several competing offers. In these type of scenarios, sellers are going to look for the strongest offer they receive. This doesn’t necessarily mean the highest offer, but the offer most likely to have a smooth transaction ending with a successful closing. If a non pre-approved buyer places an offer on a property with multiple offers, the sellers are most likely not going to take the risk of accepting it. Furthermore, most sellers are now requiring buyers to submit a letter of pre-approval with their offers in order for them to be considered, so they can be confident the buyer is truly qualified to purchase their home.
Pin point a comfortable price range
Another factor buyers should consider about applying for a loan is that they cannot pin point a price range they are comfortable looking in until they meet with a lender. Many times buyers who shop before doing their homework end up disappointed after looking in a price range higher than they actually qualify for. It is a lot harder to fall in love with a home after looking at several in a higher price range.
Find out what type of loan is best for you
There are numerous different kinds of loans buyers can use to fund a home purchase. Each type of loan has its own requirements of both the buyer and the property, and not all loans can be used on all properties. Often times buyers will find the home of their dreams before meeting with a lender only to find out the loan they qualify for cannot be used on the property they found. This can be heartbreaking for any buyer.
Surprises and unique situations
More often than not buyers first learn about hurdles which can keep them from obtaining a mortgage when they apply for a loan. With so many factors that go into a pre-approval, it is easy for something to come up that a buyer was not aware of. It is important to address and resolve these situations before a buyer gets their heart set on specific property. Lenders are wonderful resources in helping buyers move past such situations, but many of these take time; more time than it will take for a perfect home to go under contract with another buyer, and more time than is available once a buyer is under contract on a home.
With all of the factors that go into obtaining a loan, it is vital for home buyers to do their homework with a lender and wait until they are pre-approved before they go shopping for a new home. This is especially important while the Denver metro area’s market conditions do not favor buyers.
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