Buying a house is not as simple as going to the store and getting milk. There are a lot of moving parts and a lot of parties involved in the transaction. Purchasing a home involves more than just the homebuyer and the home seller. If you need financing to buy your home, then you have a lender to work with. In most transactions, there are at least two realtors. Then you also have a title company and of course you cannot forget about insurance. When you think about it, there are a lot of interested parties involved in a real estate transaction and even more paperwork. Anytime you have a system that is this complex it is best if you have an order of operation for how it should optimally work. When it comes to buying a home, there is and getting pre-approved for a mortgage is the first step. 

Speak to a Mortgage Broker Before a Realtor

If you are interested in buying a house it might seem like common sense to find a realtor. After all, in order to buy a home you need to find the home, which is something that realtors are particularly adept at. While it is true that you will eventually want to speak with a realtor, it is important to remember your goal. Your goal is not to find a house. Your goal is to buy a house. When you put it like this, it makes sense that the most important thing you need is to make sure you have the purchasing power to make the actual purchase. That is why the first person you need on your team is a mortgage broker. They are the professionals who will make sure that you are not merely searching for a house and are actually on the path to be a homeowner. 

Mortgage Pre-Qualification Sets Your Budget

Speaking with a mortgage broker first is important because it gives you an opportunity to get pre-approved for a mortgage. In turn, getting pre-approved for a mortgage will help you set your budget. At some point in your journey to become a homeowner you will certainly need a professional and experienced realtor to guide you. Their expertise will help you find the home of your dreams and to craft the perfect offer in order to entice the home seller. However, finding a home and making an offer on a home is all academic until you actually know what your budget is. 

A mortgage pre-qualification helps you set that budget because it tells you how much financing you can get from a lender. This is important information for your realtor. This will establish a range for which homes they show you. There is no point in looking at houses that are well beyond the amount you have been pre-approved for because that only risks heartache. Falling in love with a house that is outside of your price range just adds unnecessary frustration to the homebuying process. Finding a house within your budget is uniquely important in today’s real estate market. A majority of homes are selling for more than their asking price. Knowing your exact budget can help your realtor find homes within a price cushion in anticipation that the sale price will be more than the asking price. 

Mortgage Pre-Qualification Helps Win Bidding Wars

Most houses are selling for more than their asking price and that is because most homes have more than one potential buyer making an offer. According to the National Association of Realtors, each home for sale is getting an average of 5.1 offers. Basically, if you hope to buy a house you can expect that you will find yourself in a bidding war with at least five other potential buyers. 

Being pre-approved for a mortgage can give you an advantage over other potential buyers. Pre-qualification sends a “green light” to sellers that you are a motivated homebuyer and that they can be comfortable with your ability to afford the house. In a world where multiple buyers are vying for the same property, there is no reason a seller would accept an offer from someone without a pre-qualification letter. First, it adds more time to the transaction. Once they accept your offer, they then have to wait for the buyer to find a lender and secure financing. Second, it adds uncertainty. There is not guarantee that a homebuyer will find a lender that will offer them financing at the amount of the offer. Home sellers have no incentive to deal with this sort of risk especially in a real estate market where they have all the leverage. 

Final Thoughts

In today’s real estate market, low mortgage rates are increasing the demand to buy a new house. Unfortunately, the amount of homes available to purchase is rather low. This has led to a situation where you can almost guarantee that you will be in a bidding war versus other homebuyers. It is important to understand this going into the homebuying process and to do what you can to give yourself an advantage. Getting pre-approved for a mortgage is the first step you should take to give you the advantage you need. If you are interested in buying a house and want to see if you qualify for a pre-qualification letter, contact us! Our team of professional independent mortgage brokers is here to help you every step of the way.