In my last post, I mentioned that getting pre-approved for a mortgage before you sell your house is a wise move. With the real estate market moving as quickly as it is, I wanted to take a deeper dive into why getting a pre-approved mortgage isn’t just recommended, it’s vital.
(To be clear, a pre-approved mortgage is when a lender commits, in writing, to financing a potential borrower. This is a level of commitment far greater than a pre-qualified mortgage. Of the two, homebuyers should insist on pre-approval, not pre-qualification.)
Many buyers think that they can start looking at houses before they get pre-approved for a mortgage. Don’t make this mistake! Going into the market blind is asking for trouble, and to help outline the reasoning as to why here are three HUGE reasons you need to get pre-approved first.
You’ll Know What You Can Afford
Having a pre-approved mortgage takes the guesswork out of home shopping. By talking with a mortgage broker before looking for a home, you’ll have a clear and comprehensive understanding of your financial situation. This process will identify any problems with your credit ahead of time, letting you know exactly what homes are within your price range. Why waste weeks looking at houses that don’t fit your needs, when a simple pre-approval will make it clear at a glance which houses are actual options?
Buying a home is a stressful process, but instead of rushing around town, desperately searching for a decent home, a pre-approved mortgage will give you the freedom to shop with ease of mind. Some lenders offer rate locks on pre-approved mortgages, meaning you won’t be a victim of the whims of the market. This is especially beneficial right now since mortgage rates appear to be on a slight incline after years of being historically low. Even without a rate lock, pre-approved mortgages allow you to take your time when making one of the biggest decisions of your life, as most of them are good for 60, 90 or even 120 days.
The Seller is More Likely to Accept Your Offer
The real estate market is red hot right now, which means that many sellers are getting multiple offers on their home. Beating out the competition by making the best all-round offer is as important as finding the right house in today’s market. Imagine you had two offers on your house. Both were for the same amount of money, but one offer had a pre-approved mortgage, while the other one didn’t. Which one would you choose?
Avoid putting yourself in a position where your dream home could slip out of your fingers, especially when you could have secured the sale with a pre-approved mortgage. In fact, some sellers might even be willing to take smaller offers if it comes with the guarantee of a smooth deal that a pre-approved mortgage brings. Having your money ready will put you in a stronger negotiating position, allowing you to get one step closer, not only to own the perfect home but true financial freedom.
You Won’t Find Yourself Suddenly Without Financing!
The nightmare scenario for most homebuyers is finding themselves in a deal that they can’t afford. Imagine making an offer on your dream house and having it accepted by the seller, but then finding out at the bank that you don’t have access to any financing. If you are forced to back out of a contract, you are likely to lose the hefty deposit you made, among other financial consequences. The seller could take a variety of legal actions against you, beginning a process that is sure to be costly, time-consuming and stressful (and you won’t even have a new house by the end of it). By looking for a home without getting your finances in order, you are opening yourself up to a lot of unnecessary risks. Take the time to get a pre-approved mortgage in place so that you can make an offer with confidence.
Buying your first home is an incredibly exciting moment, but getting the right house at the right price takes a lot of preparation. With a pre-approved mortgage, the process will be much less stressful, put you in a better position to seal the deal, and will help you to avoid financial disaster after you make an offer. If you’re thinking of buying a house and want to learn more about pre-approved mortgages, feel free to give me a call at 705-315-0516. I am always happy to help you better understand your mortgage options to make sure that you can secure the home of your dreams with a process that’s smooth and with a limited amount of stress.