One Homebuying Step You Don’t Want To Skip: Pre-Approval

<article class="post-1340143 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-1340143"><span class="entry-date">January 16, 2025</span><div class="entry-header center-block text-center"><h1 class="entry-title">One Homebuying Step You Don’t Want To Skip: Pre-Approval</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=One+Homebuying+Step+You+Don%E2%80%99t+Want+To+Skip%3A+Pre-Approval&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fone-homebuying-step-you-dont-want-to-skip-pre-approval%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="One Homebuying Step You Don’t Want To Skip: Pre-Approval Simplifying The Market" decoding="async" loading="lazy" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20250113/20250116-One-Homebuying-Step-You-Don-t-Want-To-Skip-Pre-Approval-original.png" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width=""/>
<p>There’s one essential step in the <a href="https://www.simplifyingthemarket.com/2024/12/18/the-biggest-perks-of-buying-a-home-this-winter/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">homebuying</a> process you may not know a whole lot about and that’s pre-approval. Here’s a rundown of what it is and why it’s so important right now.</p>
<h4><strong>What Is Pre-Approval?</strong></h4>
<p>Pre-approval is like getting a green light from a lender. It lets you know how much they’re willing to let you borrow for a home. To determine that number, a lender looks at your financial history. According to <em>Realtor.com</em>, these are some of the <a href="https://www.instagram.com/p/DDujCNKP_tA/" rel="noopener noreferrer" target="_blank">documents</a> a lender may ask you for during this process:</p>
<ul>
<li>W-2s from the last two years</li>
<li>Tax returns from the last two years</li>
<li>Pay stubs from the last 30 days</li>
<li>Bank statements from the last 60 days</li>
<li>Investment account statements (if applicable)</li>
<li>Two years of history of where you’ve lived</li>
</ul>
<p>The result? You’ll get a pre-approval letter showing what you can borrow. Keep in mind, that any changes in your finances can affect your pre-approval status. So, after you receive your letter, avoid switching jobs, applying for new credit cards or other loans, or taking out large sums of money from your savings.</p>
<h4><strong>How It Helps You Determine Your Borrowing Power</strong></h4>
<p>This year, <a href="https://www.simplifyingthemarket.com/2024/12/10/what-will-it-take-for-prices-to-come-down/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">home prices</a> are expected to rise in most places and mortgage rates are still showing some volatility. So, since affordability is still tight, it’s a good idea to talk to a lender about your home loan options and how today’s changing mortgage rates will impact your future monthly payment.</p>
<p>The pre-approval process is the perfect time for that. Because it determines the maximum amount you can borrow, pre-approval also helps you figure out your budget. You should use this information to tailor your home search to what you’re actually comfortable with as far as a monthly mortgage payment. That way, you don’t fall in love with a house that’s out of your comfort zone.</p>
<h4><strong>How It Helps You Stand Out </strong></h4>
<p>Once you find a home you want to put an offer on, pre-approval has another big perk. It not only makes your offer stronger, it shows sellers you’ve already undergone a credit and financial check.</p>
<p>When a seller sees you as a serious buyer, they may be more attracted to your offer because it seems more likely to go through. As Greg McBride, Chief Financial Analyst at <em>Bankrate</em>, says:</p>
<blockquote><p><em>“Preapproval carries more weight because it means lenders have actually done more than a cursory review of your credit and your finances, but have instead reviewed your pay stubs, tax returns and bank statements. </em><strong><em>A preapproval means you’ve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.”</em></strong></p></blockquote>
<h3>Bottom Line</h3>
<p>If you’re planning on buying a home, getting pre-approved for a mortgage should be one of the first things on your to-do list. Not only will it give you a better understanding of your borrowing power, it can put you in the best position possible to make a strong offer when you find a home you love. Connect with a trusted lender to learn more.</p>
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