Just Why Are Pre-Approvals So Important?

With over three million existing homes for sale nationwide, the third quarter of the year was yet again an outstanding period in the housing market. The D.C. metro area is still ranked as one of the hottest markets for real estate. Recent talk of a bursting bubble is still just that: talk. Favorable housing “affordability”—which takes into account mortgage rates, family income, and home prices—has kept the housing market at the forefront of the U.S. economy. And with the spring in full swing and summer right around the corner, the housing market is revving up for the key buying and selling season.

So in this time of still-frenzied home shopping, what can you do to get an edge? What advantage can you gain in the lending, buying, and closing process? The first and most important step is pre-approval, which is a thorough assessment by a lender of a client’s income, assets, and application for a loan.

With the current robust market conditions, many lenders have found they actually have more business than they can handle at times. With the interest rates still fairly low, many brokers are being overwhelmed with applications for new home loans. By getting a pre-approval, you are put at the front of the pack; a pre-approval shows the lender that you are ready to buy or refinance. Also, mortgage brokers are high on pre-approval because it very easily separates the qualified customers from the non-qualified customers, thus saving them valuable time as well as money.

A pre-approval also shows the seller that you are serious about purchasing a new home. By presenting yourself in this way, the seller may bump you to the top of the list if there are several possible buyers. Also, a pre-approval allows a buyer to propose a quick close to the purchase. Every buyer, seller, agent, and lender desires that all-important closing by the date of escrow.

Imagine that you’ve finally found your dream home. Now imagine being halfway into the purchase process and finding out you’re not quite qualified to buy the house. What could be worse? With pre-approval, you and the seller will know ahead of time exactly what you will be able to afford in terms of financing. Preventing costly and time-consuming delays is a great benefit of pre-approval for you, your lender, and the seller. By preparing your financing ahead of time, you can avoid possible pitfalls throughout the home buying process. And pre-approval also gives you something you certainly can’t put a price on: peace of mind.

Try to think of pre-approval as starting a marathon an hour before the other runners. Don’t skip this step or you just may be left behind in the race for your dream home.  ∆