Pre-Approval in 2023: What You Need To Know
Getting pre-approved is one of the first steps in the home-buying process. To understand why pre-approval is such an important step, you must first understand what it is and what it does for you. According to Business Insider:
A preapproval [sic] tells you which types of loans you might be eligible for, how much you might be approved for, and what your interest rate might be."
Pre-approval essentially provides you with critical information about the home-buying process that will help you understand your options and how much you may be able to borrow.
How does it function? A lender will examine your finances as part of the pre-approval process to determine how much money they are willing to lend you. Your lender will then provide you with a pre-approval letter to help you understand how much money you can borrow. This can make it easier when you go house hunting because you'll know your overall numbers. And, with higher mortgage rates affecting affordability for many buyers today, knowing your numbers is even more important.
Pre-approval demonstrates that you are a serious buyer.
Another advantage is that pre-approval can make a seller more confident in your offer because it shows you're serious about purchasing their home. According to a recent Forbes article:
"A preapproval [sic] letter from a reputable local lender can often mean the difference between accepting and rejecting an offer from the seller's perspective."
This demonstrates that, while you may not face the intense bidding wars seen during the pandemic, pre-approval is still an important part of making a strong offer. According to Christy Bieber, Personal Finance Writer at The Motley Fool, it may be the most important part of making an offer:
"Pre-approval increases the likelihood that you'll be able to close the deal - and sellers want to see that.
The fact that a pre-approval increase your chances of having your offer accepted is without a doubt the most important reason to complete this step. . .”
Getting pre-approved is an important first step in the home-buying process. It informs you of your borrowing capacity and demonstrates to sellers that you are serious about purchasing their home. Connect with a local real estate professional and a reputable lender to ensure you have the resources you need to buy a home in today's market.
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