Ever wonder why you hear the term "pre-approval" so often when preparing to buy a house? Getting pre-approved is an important first step for any new or experienced home buyer. It not only says to your agent and mortgage broker that you're serious, and ready to make an offer that sellers will be more likely to accept, but it also helps buyers avoid sticker shock and flying blind, so to speak, in looking at homes with no gauge established for what they can afford to mortgage.
So often buyers will dive into the fun part of home shopping, and make their final selections to tour. Everyone loves to see their possible next home and begin day-dreaming of all of the possibilities, but then the reality of realty comes into play, and can be discouraging for unprepared buyers. This is where having your pre-approval in hand will set you apart, make it easier to shop within your mortgaging range, and still find an awesome new home to day-dream about!
What exactly is a pre-approval, and is it hard to obtain? A pre-approval is merely a letter of commitment, though not an approved loan itself, provided by a lender who has worked with your mortgage broker and real estate agent to ascertain the potential mortgage amount and rate for which you could qualify. Getting your pre-approval is easy, and about as involved as filling out an application and gathering a few financial and tax documents for your lender to review. The lender will look at your credit report, last few years of W-2s and federal tax returns, recent bank statements, and maybe even a side-by-side list of your assets and liabilities (A&L). Your A&L includes your savings and other financials, like equity in a current home, an investment portfolio, a 401(k) or Roth IRA, cars, and other valuable tangible property (AKA collateral), versus outstanding loans, credit card balances, and other debts you owe (subtract the liabilities from your assets to get your net worth, in brief). The review takes very little time, and then the lender will provide you with a letter showing how much you could be approved for and at which mortgage rate.
The actual loan you get if you decide to use that lender for your home purchase could vary, but this letter of commitment is like your credit card (or if you don't like being reminded that you're borrowing money, call it your "ability to pay" - that has a slightly better ring to it). Home sellers as well as their listing agents will be far more likely to take your offer on a home seriously once you are pre-approved, because as you might imagine, they get lots of offers from those who cannot afford the home, which wastes a lot of time for everyone. The supply of homes for sale remains in somewhat tight supply, with the economy still going strongly in the U.S. as of the second quarter of 2016, so always expect to be competing with one or more other buyers who also want to buy the home you're interested in - and then relax, because most of the time, the other buyers are not pre-approved! The seller will compare offers and think "this buyer likes the home and can afford it right now; this other buyer has no pre-approval and so they've got no idea if they can afford it." Which offer would you go with if selling your own home? In fact, this hits another important part of buying real estate: always bearing in mind what the seller of the home is probably thinking, as if you were the seller: What would your priorities be? What would you expect from a buyer, and what would you decide was not worth spending time on? Keeping this frame of thought in the back of your mind will make you a more savvy buyer in the business of enacting a real estate transaction!
At Premier Midtown Realty, we make it a quick and straightforward process to help our buyers obtain their pre-approval first and foremost, since it doesn't cost anything to get a pre-approval letter from most lenders (and if you end up buying a home, the ones who charge for pre-approval screening usually waive the fee anyway), and its a huge relief to know before you go - home-shopping, that is! Call us today at (916)502-0953 or email us here with any questions you have. We provide free consultations to buyers considering getting a pre-approval, and offer free custom listing reports to buyers that have gotten their pre-approval letter. Check out our buyer presentation to learn more about preparing to buy a home, and we're always happy to discuss the process with you!
Premier Midtown: "Your Partners in Midtown Sacramento & Central Valley Real Estate!"
Ryan Wagner, California Real Estate Broker. CA BRE license # 01968073.
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