Why You Need to Get Pre-Approved Before Shopping For Homes
It might seem like the most logical step to buying a home is to actually go and look at homes, but that’s not the case. There’s an important step you need to take care of before you even schedule your first home showing. Today I want to share with you why you need to get pre-approved before shopping for homes. It’s something I always recommend to my buyers and here are the reasons why.
What is pre-approval?
Getting pre-approved on a home loan simply means that a lender has reviewed your financial status and credit situation and can guarantee (in writing) that there is nothing standing in your way of getting a home loan. They also help determine what amount you can borrow, so there are no surprises once you find the home of your dreams.
Why do you need to get pre-approved?
The real estate market is moving really fast right now and it’s not uncommon for a house to have multiple offers the first day it’s listed. Sellers often collect offers, and then sit down to review them all at once to choose just one. A seller’s end goal is to get their house sold for the most money and the least hassle. If a seller has two offers for the same amount of money, then other factors come into play, such as closing date and pre-approval. They want to choose an offer that they feel confident will move through the closing process without any issues. A pre-approval letter is one step closer to closing since they know you are actually qualified to borrow the money you need.
Many sellers are asking that a pre-approval letter be included with your offer to purchase and you don’t want to be held up from making an offer while you wait for the bank to process your pre-approval. Have it ready to go before look at houses.
Another reason to get pre-approval is that it helps determine what price range you should be looking in. A pre-approval letter tells you what the maximum you can borrow is. Knowing your budget before you look at houses can save from the heartache of falling in love with a home, or a neighborhood you cannot afford.
What do you need to get pre-approved?
Before you apply for pre-approval, it’s helpful to take a look at your credit report so you know what’s there. There are numerous places to get free credit reports and checking your own credit score will not hurt your credit. If you are planning for pre-approval well in the future, you could also work to pay down any debts so you have a stronger credit standing when the time comes.
A lender will likely give you a list of items to bring with you to your appointment, but here are some of the most common items needed for pre-approval…
Photo ID (usually a driver's license or passport)
Social security number
Recent pay stubs
Bank statements from the previous 2 months
W-2 tax forms for the past two years
Federal tax returns dating back two years
How long does pre-approval last?
Because pre-approval is based so much on your current financial qualifications, it does have an expiration date, typically 60-90 days. If you don’t find a home within that time frame, you’ll need to go through the process again and get a fresh pre-approval letter.
What to do first if you want to buy a house.
Contact a Realtor (hopefully me) and discuss what you are looking for in a home and location so that you can get an idea of current home prices in your area, then get your pre-approval in place. It will make your offers more appealing to sellers, and ensure you are looking in the right price range as you search for your future home, sweet, home. Now that you know why you need to get pre-approved before shopping for homes, you can move forward with confidence.
I’ve got a few great lenders that I know will take good care of you, so if you need a recommendation, please just ask.