Searching for a home to buy is an exciting one. Would-be buyers frequent open houses and pour over listings, eager to attain the dream of buying a home.
Yet, the journey to home ownership requires a crucial step—getting preapproved for a mortgage.
Should you get preapproved for a mortgage, before you look for your home? Glad you asked.
Let’s explore the reasons why getting a preapproval is so important.
Preapproval vs Prequalification
You’re best off regarding a mortgage preapproval as the first official step to buying a home.
Before we go into why, it’s helpful to know what we mean by preapproval, as it can sometimes be confused with prequalification.
When you’re preapproved for a mortgage, you:
- Complete a more in-depth application process.
- Gain a fuller understanding of your credit history and financial circumstances.
- Receive a letter stating that a lender is prepared to offer financing.
- Know your purchasing power.
Prequalification, on the other hand, only tells you how much you’re likely to qualify for. It’s a less official estimation of your purchasing power. Many sellers prefer a preapproval letter, as it financially vets buyers before they tour their home. This places you at a greater advantage during your house search.
In addition to giving you a clearer financial outlook, preapprovals offer other advantages when looking to buy a home that will make your experience much easier.
Preapprovals put you in the right mindset
Should you get preapproved for a mortgage, you’ll likely feel elevated to a buyer’s state of mind.
Searching with a preapproval gives you the confidence of a buyer who’s ready to act, which increases your odds of finding the right property.
Most importantly, it gives you an idea of what your estimated monthly payments will be, so you can understand exactly how much home you can afford.
A preapproval shows Realtors® you mean business
Now that you’re taking yourself more seriously as a buyer, it helps when others involved in the process take you seriously, too.
Once you’re preapproved for a mortgage, you’re realtor is better able to help you reach your goal of home ownership.
Many Realtors® will politely decline clients, who aren’t yet preapproved. This is because they know how tenuous the buying process can be, and waiting for clients to get approved (or possibly denied) for a mortgage is a sure way to clog up an already complicated process.
Remember, your Realtor® is better able to advocate for you, when they have an honest picture of what you can afford.
Sellers look for preapproved buyers
Most sellers won’t entertain buyers who don’t have a preapproval letter.
Think of it from their perspective—what if you’re ultimately denied for the mortgage? What if you’re approved for an amount less than what their home is listed for?
Basically, proving you can pay goes a long way:
- It gives you negotiating leverage. Looking at a home in your price range with the backing of a lender lets sellers know you’re serious.
- You won’t waste valuable time. Being preapproved for a mortgage shows sellers you’re ready to go and have taken the necessary steps to make an offer.
There’s arguably no element more important in a real estate deal than proof of funding—it’s a financial transaction, after all!
When all is said and done
So, should you get preapproved for a mortgage, before searching for a home? The answer is yes.
If you have questions about the preapproval process and what other steps you should take to buy a home, we have experts who can guide you through.
If you’re ready to buy, reach out to one of our expert Realtors® to see how we can help turn your dream into a reality.