Why Pre-Approval Is Key for Homebuyers in 2022

<article class="post-161003 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-161003"><span class="entry-date">January 24, 2022</span><div class="entry-header center-block text-center"><h1 class="entry-title">Why Pre-Approval Is Key for Homebuyers in 2022</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=Why+Pre-Approval+Is+Key+for+Homebuyers+in+2022&url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fwhy-pre-approval-is-key-for-homebuyers-in-2022%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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<p><img alt="Why Pre-Approval Is Key for Homebuyers in 2022 | Simplifying The Market" class="webfeedsFeaturedVisual wp-post-image" decoding="async" link_thumbnail="" loading="lazy" sizes="auto, (max-width: 549px) 100vw, 549px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2022/01/21102322/20220124-KCM-Share-549×300.jpg" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2022/01/21102322/20220124-KCM-Share-549×300.jpg 549w, https://files.simplifyingthemarket.com/wp-content/uploads/2022/01/21102322/20220124-KCM-Share.jpg 750w" style="display: block; margin-bottom: 5px; clear:both;max-width: 100%;" width="358"/></p>
<p>You may have heard that it’s important to get <a href="https://www.simplifyingthemarket.com/2021/05/07/the-power-of-mortgage-pre-approval-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2">pre-approved</a> for a mortgage at the beginning of the <a href="https://www.simplifyingthemarket.com/2021/11/19/your-journey-to-homeownership-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2">homebuying process</a>, but what does that really mean, and why is it so important? Especially in today’s market, with rising <a href="https://www.simplifyingthemarket.com/2022/01/13/whats-going-to-happen-with-home-prices-this-year/?a=712984-fa409495d5d70154d03a25e81e9540e2">home prices</a> and high <a href="https://www.simplifyingthemarket.com/2022/01/20/buyers-want-to-know-why-is-housing-supply-still-so-low/?a=712984-fa409495d5d70154d03a25e81e9540e2">buyer competition</a>, it’s crucial to have a pre-approval letter prior to making an offer. Here’s why.<span id="more-45892"></span></p>
<p>Being intentional and competitive are musts when buying a home this year. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows sellers you’re a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.</p>
<p>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 <em>National Association of Realtors</em> (NAR), homes today are receiving an average of <a href="https://www.nar.realtor/research-and-statistics/research-reports/realtors-confidence-index">3.8 offers</a> for sellers to consider. As a result, bidding wars are still common. Pre-approval gives you an <a href="https://www.simplifyingthemarket.com/2021/12/28/5-tips-for-making-your-best-offer-on-a-home/?a=712984-fa409495d5d70154d03a25e81e9540e2">advantage</a> 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.</p>
<p><em>Freddie Mac</em> <a href="https://myhome.freddiemac.com/blog/homeownership/20180926_strategies_for_winning_the_bidding_war.page">explains</a>:</p>
<blockquote>
<p><em>“By having a </em><a href="https://myhome.freddiemac.com/blog/homeownership/20201001_get_pre_approved.page"><em>pre-approval letter</em></a><em> 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.”<br/></em></p>
</blockquote>
<p>Every step you can take to gain an advantage as a buyer is crucial when today’s market is constantly <a href="https://www.simplifyingthemarket.com/2022/01/12/two-ways-homebuyers-can-win-in-todays-market/?a=712984-fa409495d5d70154d03a25e81e9540e2">changing</a>. Interest rates are rising, 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 such as a loan officer and a trusted real estate advisor making sure you take the right steps and can show your qualifications as a buyer when you find a home to purchase.</p>
<h3><strong>Bottom Line</strong></h3>
<p>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.</p>
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