This is a common question we hear from first-time home buyers. So I will explain why pre-approvals are so important in today's real estate market!
One of the first things you can do as part of the home-buying process is to get pre-approved with a mortgage lender.
Why? To determine how much house you can afford and a pre-approval lets real estate agents and sellers know you have the finances lined up and ready to go.
In most cases, lenders will need to following documents to get started.
- W2 Tax Statements
- Current Bank Statements
- Address/Drivers License
- Self-Employment Documents
Top 5 reasons having a pre-approval will benefit you!
- You’ll be a more powerful buyer: This is crucial in a competitive market. Real estate agents and sellers will see you as a serious buyer when you have the backing of a lender. Pre-approval means a lender has looked at your financial background and determined how much home you can afford.
- Save Time: Getting pre-approved can also save you valuable time by identifying how much you can afford, so you can target your home search to your price level. This also allows you to focus on the features of the home rather than worrying about the price tag.
- Bargaining Power: With a pre-approval letter in hand, you will likely have more negotiating power because sellers and real estate agents know that you have already talked to a lender and you mean business. In most cases, sellers won’t even consider a offer without having a current pre-approval.
- Avoid Surprises: Talking to a loan originator before finding your perfect home can help ensure you’re not surprised when it’s time to make an offer. Getting your ducks in a row early will leave little room for unexpected surprises – such as a low credit score or a less than desirable debt-to-income ratio – when you find the home you’ve been looking for.
- Shorter Closing Times: A pre-approval can help to speed up the closing process, since much of your financial information is already collected and in the lender’s system.
