Why Pre-Approval Should Be at the Top of Your Homebuying To-Do List

<article class="post-1189285 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-1189285"><span class="entry-date">September 10, 2024</span><div class="entry-header center-block text-center"><h1 class="entry-title">Why Pre-Approval Should Be at the Top of Your Homebuying To-Do List</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+Should+Be+at+the+Top+of+Your+Homebuying+To-Do+List&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fwhy-pre-approval-should-be-at-the-top-of-your-homebuying-to-do-list%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="Why Pre-Approval Should Be at the Top of Your Homebuying To-Do List Simplifying The Market" decoding="async" loading="lazy" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240904/20240910-Why-Pre-Approval-Should-Be-at-the-Top-of-Your-Homebuying-To-Do-List-original.png" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width=""/>
<p>Since the supply of <a href="https://www.simplifyingthemarket.com/2024/08/12/are-there-more-homes-for-sale-where-you-live/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">homes for sale</a> is growing and <a href="https://www.simplifyingthemarket.com/2024/08/07/mortgage-rates-down-a-full-percent-from-recent-high/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">mortgage rates</a> are coming down, you may be thinking it’s finally <a href="https://www.simplifyingthemarket.com/2024/08/16/3-reasons-to-move-in-todays-shifting-market/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">your moment</a> to jump into the market. To make sure you’re ready, you need to get pre-approved for a mortgage. </p>
<p>That’s when a lender looks at your finances, including things like your W-2, tax returns, <a href="https://www.simplifyingthemarket.com/2024/08/15/what-credit-score-do-you-really-need-to-buy-a-house/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">credit score</a>, and bank statements, to figure out what they’re willing to loan you. After that process, you’ll get a pre-approval letter to show what you can borrow. Here are two reasons why this is essential in today’s market.</p>
<h4><strong>Pre-Approval Helps You Know Your Numbers</strong></h4>
<p>While <a href="https://www.simplifyingthemarket.com/2024/01/18/3-key-factors-affecting-home-affordability/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">home affordability</a> is finally starting to show signs of improving, it’s still tight. So, it’s a good idea to talk to a lender about your loan options and how today’s changing <a href="https://www.simplifyingthemarket.com/2024/08/19/how-mortgage-rate-changes-impact-your-homebuying-power/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">mortgage rates</a> will impact your monthly payment. The pre-approval process is the perfect time for that. In addition to determining the maximum amount you can borrow, pre-approval also helps you understand this piece of the puzzle. As <em>Investopedia </em>says:</p>
<blockquote><p><em>“Consulting with a lender and obtaining a pre-approval letter allows you to discuss loan options and budgeting with the lender; </em><strong><em>this step can clarify your total house-hunting budget and the monthly mortgage payment you can afford</em></strong><em>.”</em></p></blockquote>
<p>You should use this information to tailor your <a href="https://www.simplifyingthemarket.com/2024/07/22/how-affordability-and-remote-work-are-changing-where-people-live/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">home search</a> to what you’re actually comfortable with budget-wise. Since mortgage rates have inched down some lately, you may find you’re able to afford a bit more than you’d expect for your monthly payment, but you still want to <a href="https://www.simplifyingthemarket.com/2024/07/19/the-biggest-mistakes-homebuyers-are-making-right-now/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">avoid overextending</a>. As CNET explains:</p>
<blockquote><p><em>“In many cases, a lender may preapprove you for more than you need to spend on a home. And while it can be tempting to look at houses outside your budget, it won’t help you in the long run. </em><strong><em>Before you start touring homes, figure out how much you can realistically afford and stick to your budget.”</em></strong></p></blockquote>
<h4><strong>Pre-Approval Makes Your Offer More Appealing</strong></h4>
<p>And once you do find a home you want in your budget, pre-approval has another big perk. It not only makes your offer stronger, it also shows sellers you’ve already undergone a credit and financial check. 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><em>.”</em></p></blockquote>
<p>As mortgage rates trend down, more buyers are going to be ready to jump back into the market. And while demand is still limited right now, there’s the potential for competition to pick back up, especially in hot markets. So, why not stack the deck in your favor and make sure you’re putting yourself in the best position possible when you find a home you love?</p>
<h3>Bottom Line</h3>
<p>If you’re planning on buying a home, don’t forget to get pre-approved early in the process. It can help you get a more in-depth understanding of what you can borrow and shows sellers you mean business.</p>
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