Why do you Need to Be Pre-Approved to Buy a Home

Dated: August 27 2020

Views: 48

Why Is It so Important to Be Pre-Approved in the Homebuying Process?

Why Is It so Important to Be Pre-Approved in the Homebuying Process? | MyKCM

You may have heard that pre-approval is a great first step in the homebuying process. But why is it so important? When looking for a home, the temptation to fall in love with a house that’s outside your budget is very real. So, before you start shopping around, it’s helpful to know your price range, what you’re comfortable within a monthly mortgage payment, and ultimately how much money you can borrow for your loan. Pre-approval from a lender is the only way to do this.

According to a recent survey from realtor.com, many buyers are making the mistake of skipping the pre-approval step in the homebuying process:

“Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.

This paperwork (the pre-approval letter) shows sellers you’re a qualified buyer, something that can really help you stand out from the crowd in the current ultra-competitive market.

How competitive is today’s market? Extremely – especially among buyers.

With limited inventory, there are many more buyers than sellers right now, and that’s fueling the competition. According to the National Association of Realtors (NAR), homes are receiving an average of 2.9 offers for sellers to negotiate, so bidding wars are heating up.

Pre-approval shows homeowners you’re a serious buyer. It helps you stand out from the crowd if you get into a multiple-offer scenario, and these days, it’s likely. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war and land the home of your dreams.

Danielle Hale, Chief Economist for realtor.com notes:

“For ‘a buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home.’”

In addition, today’s housing market is also changing from moment to moment. 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 it’s important to have a team of professionals (a loan officer and a real estate agent) making sure you take the right steps along the way and can show your qualifications as a buyer at the time 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. If you’re ready to buy this year, let’s connect before you start searching for a home.

Blog author image

Arna Freedman

Looking for a Pro? Someone who will listen, negotiate and get the home you are looking for with the least amount of stress? I have been successfully working for buyers and sellers in Orange County fo....

Latest Blog Posts

Cash Buyers We Buy Homes Cash

Do you want a fast sale, no one walking through your home?                                      

Read More

Why I should Buy nor Rent

<iframe sandbox='allow-scripts' src='https://www.simplifyingthemarket.com/en/videos/embed/237874-cf01eafb21d1efc392d8d17c361b86b7/b947b740' frameborder='0' allowfullscreen width='560' height='&

Read More

How a Buyer can Stay Motivated in a Seller's Market

<iframe sandbox='allow-scripts' src='https://www.simplifyingthemarket.com/en/videos/embed/237874-cf01eafb21d1efc392d8d17c361b86b7/2a86add7' frameborder='0' allowfullscreen width='560' height='&

Read More

Buyer's Can Make A Difference This Way!

Pre-Approval Makes All the Difference When Buying a HomeYou may have been told that it’s important to get pre-approved at the beginning of the homebuying process, but what

Read More