If there’s one thing you should absolutely do before you look at houses, it’s getting pre-approved. It might seem premature to bother a lender when you aren’t ready to buy a house yet, but it will shed light on what you can afford.
Shopping for a home without a pre-approval is like shopping at a high-end store without any money. You have to know your spending limits and the conditions you must satisfy in order to get financing. It’s a vital first step in the process.
If you still aren’t convinced, keep reading to learn why you should get pre-approved first.
Sellers Want to See Pre-Approved Buyers
Sellers have just as much time in their day as you do. They want to know that you are fully qualified to buy a home. Without a pre-approval in hand, they are taking your word for it. How do they know that you can afford the home? The pre-approval provides the proof the seller needs to take you seriously.
Without that proof, a seller may not even take the time to show you their home. They probably figure there’s no point since you may not be able to afford it. Even if a seller lets you see the home, they may not take your bid seriously until you have that piece of paper in your hands.
You Can Stay Within Budget
Who wants to waste their time shopping for a home they can’t afford? Wouldn’t you rather know what parameters you must stay within when you shop for a home? This will help prevent any type of letdown when you realize that you can’t afford the home you thought you could afford.
Knowing your budget helps you target your home search to the homes and areas that fit within your constraints. Look at it this way, you’ll probably find a home faster than you would if you wasted your time on homes outside of your price range.
You’ll Know if You Have Any Barriers to Approval
Sometimes things come up that prevent you from getting a mortgage, but you don’t know it until you apply. When the lender pulls your credit, they may notice something that will prevent you from securing an approval. You can use this time to find out what’s wrong with your credit and see what you need to do to fix it.
If it’s not your credit, but rather your debt ratio, lack of assets, or inconsistent employment that prevents you from getting an approval, you can work on fixing those issues. The pre-approval can be a time to see where you stand and let you know what you need to do to fix things. This way when you can take the time to fix the issues and get the approval that you need in the near future.
You May Win a Bidding War
If you find yourself caught buying a home in a seller’s market, you could wind up in a bidding war. When there’s high demand for home, buyers may try to outbid one another. Having the pre-approval can do a few things for you:
- Help you know your budget constraints when bidding on a home
- Help the seller take your bid seriously
If you don’t have that pre-approval letter, you may find a seller that takes an offer lower than yours because that buyer has a pre-approval letter. It holds a lot of weight in the eyes of the seller.
Getting a pre-approval before you shop for a home is one of the best decisions you can make. Consider it a way to help you get your bearings – you’ll know what you can afford and what conditions you have to satisfy to get the loan. Sellers will have more respect for your offer and you may stand a better chance of buying the home you really want.