In many markets across the country, the number of buyers searching for their dream home greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-approved for a mortgage before starting your search. In fact, in our competitive marketplace, no seller will give serious consideration to a buyer who does not have a strong pre-approval letter to accompany their offer. Even if you are currently in a market that is not as competitive, understanding your budget will give you the confidence of knowing your dream home is within your reach. It will also help your real estate professional locate the home that is just right for you.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
Did you know the lender you choose matters? It does! Sellers will give more consideration to well-known, local lenders with a reputation for getting the job done on time and with minimal stress on all concerned. Your choice of mortgage company and specific loan officer may make the difference between winning or losing the home of your dreams. One of the many advantages of working with a local real estate professional is that they will have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
- Capacity: Your current and future ability to make your payments
- Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so. If you would like a referral to a local lender to initiate the process, please let me know. And if you have any other questions, please don’t hesitate to ask. I’m here and happy to help!