Loan Pre-approval is the First Step
The number of buyers looking to purchase homes outnumbers the number of available homes for sale. It is a competitive real estate market. As a buyer, you want to stand out. A great way to show sellers you are serious about buying it to get pre-approved for a mortgage before starting your search.
Knowing what you qualify for will give you and your real estate agent a more accurate price point and will save time by only looking at homes within your price range.
Freddie Mac lays out the advantages of getting pre-approved:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
Freddie Mac describes the 4 Cs that help determine the amount you will qualify for:
- Capacity: Your current and future ability to make your payments
- Capital or cash reserves: The money, savings and liquid investments you have
- Collateral: The home, or type of home, you would like to purchase
- Credit: Your history of paying bills and other debts on time
Submitting a pre-approved letter from a lender with your offer, is something that shows sellers you are financially able to get to the closing table. Most sellers will not even consider an offer without a lender letter.
Real Estate Bottom Line
Many buyers overestimate the down payment and credit scores required to qualify for a mortgage. If you are looking to buy a home, you may be pleasantly surprised once you talk with a lender.