Many people are excited by historically low mortgage rates and are in the market to buy a home. In fact, last month existing home sales increased by 24.7%. There is no doubt that people are trying to strike while the iron is hot. However, not everyone is doing their due diligence before trying to buy their dream home. According to a Realtor.com survey, only 52% of potential buyers got pre-approved for a mortgage before starting their home search. That means 48% of respondents decided they would rather find their perfect house before they ever applied for a mortgage. That begs the question, which half of those surveyed are correct? Should you get a pre-approval letter before you begin the process to buy a home? The answer is an unequivocal YES! You should absolutely get pre-approved for a mortgage before you start the home buying process. 

Pre-Approval Establishes Your Budget

Before you begin searching for a new home, you need to know what your budget is. Unless you can buy a home with cash, you cannot determine your budget without knowing what size mortgage you qualify for. Knowing your budget before you begin the home buying process will save you a lot of headaches and frustration. Few things are worse than thinking you have found your dream home only to be approved for less than you need to buy it. This is a recipe for disappointment. Even though you might find a good home that meets your budget later, you won’t be able to shake the thought of what could’ve been. You should feel completely happy about your new home. You do not want it to feel like a consolation prize. 

Pre-Approval Speeds Up the Home Buying Process

Knowing your budget will make your search easier. You will save time and energy by not looking at homes that are out of your price range. This will also allow your realtor to find a home that best fits your needs. They can spend more time looking for the perfect house for your budget instead of casting the widest net possible. The quicker you get through the home search, the quicker you can get onto making an offer and eventually closing. 

Pre-approval also makes the negotiation quicker. Home sellers and agents will know up front that there is a hard limit to what you can offer. They know what price they are willing to accept, regardless of their initial asking price. They are less likely to play games with you if the amount you have been prequalified for does not meet their threshold. If you put in an offer that is equivalent to the amount you have been pre-approved for, they will know it is not a negotiation tactic. This prevents a lot of needless back-and-forth between you and their realtor. 

Pre-Approval Gives You a Competitive Advantage

The current real estate market is incredibly competitive for homebuyers and having a pre-approval letter gives you an advantage. There are a lot of buyers in the real estate market and home demand is sky high. At the same time, there is not a lot of inventory available on the open market. It also doesn’t appear as if available inventory will be increasing dramatically in the near future. Many people predicted that a wave of foreclosures would flood the market with homes, similar to the recession in 2008. However, governments and companies have continued to extend foreclosure relief, so there is no telling if or when this might happen. All of this is to say that there are a lot of buyers and not enough sellers. According to the National Association of Realtors, for every home sold there has been an average of 2.9 offers. 

Being pre-approved for a mortgage helps set you apart in a crowded market full of buyers. It lets sellers know that you are serious about buying a home. This is particularly important in the COVID era. Sellers and agents are not offering as many walkthroughs on homes as they did before the pandemic. You might not even get a chance to tour your dream home if you do not have a pre-approval letter. Chief Economist for realtor.com, Danielle Hale said it best:

“[For] a buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home.”

Bottomline 

Starting the home buying process without getting pre-approved for a mortgage is putting the cart before the horse. Before you pick up the phone to call a realtor, schedule an appointment with an experienced mortgage professional. If you have been considering looking for your dream home, then do not delay and contact us. The team at People’s Choice Mortgage can help you get pre-approved for a mortgage and set you up for success. In today’s real estate market, you need every advantage you can get. We will do everything in our power to give you a leg up on the competition.