You may have heard that it's important to get pre-approved for a mortage and the beginning of the homebuying process, but what does that really mean, and why is it so important? Especially in today's market, with rising home prices and high buyer competition, it's crucial to have a pre-approval letter prior to making an offer.
Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows you're a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.
With limited housing inventory, there are many more buyers active in the market than there are sellers, and that's creating some serious competition. According to the National Association of Realtors (NAR) homes today are receiving an average of 3.8 offers for sellers to consider. As a result bidding wars are still common. Pre-approval gives you an advantage if you get into a multiple-offer scenario, and these days, it's likely you will. When a seller knows you're qualified to buy the home, you're in a better position to potentially win the bidding war.
It shows sellers how serious you are about purchasing a home.