Pre-Approval Makes All the Difference When Buying a Home

By
Real Estate Agent with Champion Real Estate Group 0561240

You may have been told that its important to get pre-approved at the beginning of the homebuying process, but what does that really mean, and why is it so important? Especially in todays market, with rising home prices and high buyer competition, its crucial to have a clear understanding of your budget so you stand out to sellers as a serious homebuyer.

Being intentional and competitive are musts when buying a home right now. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows sellers you're a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.

With limited housing inventory, there are many more buyers active in the market than there are sellers, and that's creating some serious competition. According to the National Association of Realtors (NAR), homes are receiving an average of 5.1 offers for sellers to consider. As a result, bidding wars are more and more common. Pre-approval gives you an advantage if you get into a multiple-offer scenario, and these days, its likely you will. When a seller knows you're qualified to buy the home, you're in a better position to potentially win the bidding war.

Freddie Mac explains:

By having a pre-approval letter from your lender, you’re telling the seller that you’re a serious buyer, and you’ve been pre-approved for a mortgage by your lender for a specific dollar amount. In a true bidding war, your offer will likely get dropped if you don’t already have one.

Every step you can take to gain an advantage as a buyer is crucial when todays market is constantly changing. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You're going to need guidance to navigate these waters, so its important to have a team of professionals such as a loan officer and a trusted real estate agent making sure you take the right steps and can show your qualifications as a buyer when you find a home to purchase.

Bottom Line

In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. Not only does being pre-approved bring clarity to your homebuying budget, but it shows sellers how serious you are about purchasing a home.

 

 

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Comments (6)

Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Shayne, I know after 25 years in the business, a Buyer needs to either get approved or provide proof of funds, or I won't show a home.

Jun 29, 2021 06:34 AM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

Good morning Shayne! Only 5.1 offers per house? I would have thought it was higher.

Jun 29, 2021 07:10 AM
Kristin Johnston - REALTOR®
RE/MAX Realty Center 262-567-2455 - Waukesha, WI
Giving Back With Each Home Sold!

Great information....Thanks for sharing and have a wonderful day!

Jun 29, 2021 07:39 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Good Morning Shayne and great information for buyers to understand how important it is.

 

Jun 29, 2021 08:24 AM
Ed Silva
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

I advise my buyers to start with the basics and while we are still looking for a home give their lender the ended information to get pre-approved.  It can make the difference if  a buyer can close weeks before another offer

Jun 29, 2021 08:58 AM
Brian England
Vacasa - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

Pre-approval definitely is the first thing that should happen, that way you know what your budget for shopping will be.

Jun 30, 2021 05:28 AM