Pre Approval for Homebuying

The supply of houses on the market has fallen from an average of 1.6 million units monthly in 2018 and 2019 to just over 1 million in 2021 – and the monthly figures for this year are lower still. Fewer homes available and high demand means home buyers must leverage every available tool to compete, and pre-approval ranks as one of the most important. Here’s what every homebuyer should know about pre-approval to get the upper hand.

 

Pre-approval shows you’re a serious buyer

A pre-approval demonstrates to sellers and your Realtorâ that you are serious about buying a home. That’s because you must provide proof of income, give an accounting of debts and assets, and authorize a credit check when getting pre-approved. A lender then provides a letter you can furnish to potential sellers indicating the amount for which you’re pre-approved.

Some sellers do not even consider offers from buyers who have not been pre-approved, and some Realtorsâ may not show you homes until you’ve received this third-party verification of resources.

young couple getting pre approved for new home

Pre-approval gives you a better idea of what you can afford

While mortgage calculators are useful for loose understanding of affordability, renting vs. owning, payment and amortization, and other areas, a pre-approval offers a more comprehensive look at your finances to arrive upon a home purchase price maximum. Pre-approvals typically factor in current mortgage rates and your potential loan program and down payment amount in this calculation. Ultimately, this letter of commitment demonstrates you’re a capable buyer.

 

Pre-approval sets the stage for a deeper understanding of your future mortgage

When purchasing a new home, buyers should of course understand how to calculate mortgage payment, but a deeper understanding of mortgages will benefit you, too. Once pre-approved, you are equipped with a firm knowledge of the loan amount you qualify for, enabling you to apply that information to consider different loan programs (i.e. FHA Loans), weigh the impact of different down payment amounts, and read up on home appraisals – typically a contingency of an home purchase.

Loan programs fall into a few different categories, for instance conventional or government-insured, and each has their own unique benefits to borrowers. Both a conventional loan and a governmental loan (i.e. FHA) offer options with low down payments, but credit and eligibility requirements vary between them. Home appraisals, meanwhile, are useful to understand because should they fall short of an offer amount (which is rare), the difference may need to be accounted for in the down payment. Talk to your Homebridge Loan Originator about all of these things once you are pre-approved to stay prepared.

pre approved borrowers closing deal on new house

Ready to leapfrog the competition?

Pre-approval demonstrates you are a serious, capable, and informed buyer, helping you stand out in a tight market. Equipped with the knowledge of what you can afford, it sets you up to investigate the right loan program for you and weigh different loan calculations. Notably, a pre-approval early in the process also keeps you from the heartbreak of falling in love with a home that is beyond your budget because you have a better understanding of the purchase price you are pursuing.

Ready to get started with your pre-approval? Find a Homebridge Loan Originator near you.

Related Articles

You may have found your dream home, but it might remain a dream without approved financing. Bank statement loans, as the name implies, use bank statements to determine your income. They are a non-qualified mortgage product that offers financing to homebuyers who may not be eligible for a traditional mortgage…
Read More of the post Non-Qualified Mortgage: Bank Statements

Your first time buying a home will be exciting, offering a window into the setting of your future. At Homebridge, we delight in the opportunity to help first-time homebuyers because we are reminded of what home truly means and the positive difference it can make in people’s lives. Accordingly, we…
Read More of the post 4 Stops Along the Road to First Time Homebuying

In honor of Earth Day, consider these 10 ideas for implementing energy-efficient improvements throughout your home. Not only will these strategies benefit the environment by reducing your carbon footprint, but they will help you save money by improving your energy bill as well. No matter the time of year, improving…
Read More of the post 10 Ways to Make Your Home Energy Efficient

USING GIFT FUNDS TO BUY A HOME For many homebuyers, gift funds are a needed boost to help them cover the necessary down payment on their dream home. Although it’s common practice to receive these financial gifts from friends and family, there are still many guidelines you should consider before…
Read More of the post USING GIFT FUNDS TO BUY A HOME