Why Pre-Approval Should Be Your First Step

In many markets across the country, the number of buyers searching for their dream homes greatly exceeds the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you’re serious about buying your dream home is to get pre -qualified or pre-approved for a mortgage before you start your search. Even if you’re in a market that’s not as competitive, understanding your budget will help you know if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website.

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you’ve selected a lender, you’ll need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you’ll be qualified to borrow:

1.Capacity: Your current and future ability to make your payments

2.Capital or Cash Reserves: The money, savings, and investments you have that can be sold quickly for cash

3.Collateral: The home, or type of home, that you would like to purchase

4.Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers you’re serious about buying, and it often helps accelerate the process once your offer has been accepted.

Bottom Line

If you’re ready and willing to buy, getting pre -approved will help you feel more informed, and may even give you the competitive edge you need in today’s homebuying process.