Does Pre-Approval Really Matter in Home Shopping? The Answer May Surprise You

Learn how pre-approval can put you in a more competitive position to purchase a home in today's market.
May 17, 2023

If you're in the market to buy a home this spring, you might be facing some challenges. With limited homes available and higher mortgage rates, it's crucial to have a clear understanding of your homebuying budget. Being determined and acting swiftly when making an offer is also key. One way to prepare yourself --and even put you ahead of the competition --is by getting pre-approved.

Read on to find out more...

So, what exactly does pre-approval mean?

During this process, your loan officer or mortgage broker helps you with the application process. They will prepare an application file with your financial information so that the lender can determine the amount of loan you can borrow. Once complete, your loan officer or broker will provide you with a pre-approval letter, which outlines the maximum loan amount you can borrow.

According to Freddie Mac, pre-approval is an indication from your lender that they are ready to lend you a specific amount for your future home purchase. However, it's essential to remember that the loan amount mentioned in the pre-approval letter is the maximum offer from the lender.

Ultimately, you should only borrow an amount that you feel comfortable repaying. Your loan officer or broker can work with you to help you figure this part out.

In essence, pre-approval provides you with valuable information about the homebuying process, helping you understand your borrowing capacity and explore your options more confidently. Since higher mortgage rates can impact affordability for many buyers today, having a solid understanding of your financial situation becomes even more crucial.

Pre-approval also carries an additional benefit: it demonstrates to sellers that you are a serious buyer.

This can give them more confidence in your offer, especially considering the slight increase in the number of offers that sellers are seeing this spring. Making a strong offer is crucial when you come across the perfect house.

As the Wall Street Journal recently mentioned, if you plan to use a mortgage for your home purchase, getting pre-approved should be one of the first steps in your search process. Not only does pre-approval help you focus on the right price range, but it also gives you an advantage over other buyers.

Putting It All Together

Getting pre-approved is a significant initial step when buying a home. It provides you with valuable insights into your loan amount and demonstrates your commitment to sellers.

To navigate today's market successfully, reach out to us, your local mortgage professional. Our team is ready to guide you to the best loan program for you, helping you qualify for financing and home purchase in today's competitive environment.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.