During the Homebuying process, people always say that getting pre-approved is important, but what does that really mean and what makes it so important? What role does it play on the current market with rising home prices and high buyer competition?
Competitiveness and showing your intent are necessary when you’re looking to buy a home right now. Getting pre-approved will let you determine your true price range and how much money can you borrow with your low. Another benefit of getting a pre-approval is it gives the impression that you’re a serious buyer add it to the fact that getting pre-approved means that you’re a qualified buyer. These benefits will give you a competitive edge that can really help you land your dream home even with the current market state.
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, it’s 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 edge you can take to gain an advantage as a buyer in the constantly changing market that we have today is very crucial. With the lower interest rates, housing prices going up, and lending institution are often updating their standards. You’re going to need a guide who can navigate you through these waters easily, so it’s vital to have a team of professionals such as a loan officer and a trusted and experienced real estate agent to make sure that you’re on top of things every step of the way.
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.