Pre-approval can be a great way to make your offer stand out and give you an advantage in a competitive market. Securing pre-approval shows sellers that you are serious and have already been checked out by a lender. A homebuying budget is key, and you don’t want to put in an offer that could make it difficult for you to be approved for the loan. Even if rates are higher now, it’s essential to make sure you budget for the long-term costs of homeownership. With this in mind, you’ll be able to confidently go house-hunting with the knowledge that you’re ready to make a move when you find the right property.

Pre-approval is an important first step when considering a loan. It allows you to know what the lender believes you are capable of borrowing based on your financial history. With a pre-approval letter, you can understand how much money you can borrow and what type of loan terms you may qualify for. Knowing your pre-approval amount can help you to make informed decisions about how to use this money and what type of loan to apply for.

Freddie Mac explains it like this:

“A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. . . . Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”

Pre-approval is an important first step in the home-buying process, as it can provide essential information to give you a better understanding of the amount you may be able to borrow. This knowledge is especially important in today's market, where higher mortgage rates are making it more difficult for buyers to afford their desired homes. By completing pre-approval, you will have a clearer idea of your financial options and be better prepared for the home-buying process.

Pre-Approval Helps Show You’re a Serious Buyer

Pre-approval is a great tool to show serious buyers are ready to make an offer on a house. It also provides assurance to sellers that the offer has been looked over by a lender, meaning it is more likely to be accepted. Additionally, pre-approval helps alleviate competition when it comes time to make offers in a competitive market, as it demonstrates that buyers are financially capable of following through on their bid.

As a recent article from the Wall Street Journal (WSJ) says:

“If you plan to use a mortgage for your home purchase, preapproval should be among the first steps in your search process. Not only can getting preapproved help you zero in on the right price range, but it can give you a leg up on other buyers, too.”

Bottom Line

Getting pre-approved is a crucial first step when you're buying a home. It can let you know the amount of money you can borrow and display to sellers that you are serious about purchasing. Make sure you connect with both a real estate professional and a lender in order to have the essential tools for buying a home in today's market.