Since the supply of homes for sale is growing and mortgage rates are coming down, you may be thinking it’s finally time to jump into the market. To make sure you are ready, you need to get pre-approved for a mortgage.
That’s when a lender looks at your finances, including W-2, tax returns, credit score and bank statements. When this information is available to the lender it will give them an idea what they are willing to loan you. After that process, you will get a pre-approved letter to show what you can borrow. Here are two reasons why this is essential in today’s market.
Pre-Approval Helps You Know Your Numbers
While home affordability is finally starting to show signs of improving, it’s still tight. So, it’s a good idea to talk to a lender about your loan options and how today’s changing mortgage rates will impact your monthly payment. The pre-approval process is the perfect time for that. In addition to determining the maximum amount you can borrow, pre-approval also helps you understand this piece of the puzzle.
You should use this information to tailor your home search to what you’re actually comfortable with budget-wise. Since mortgage rates have inched down some lately, you may find you’re able to afford a bit more than you’d expect for your monthly payment.
Pre-Approval Makes Your Offer More Appealing
Once you do find a home in your budget, pre-approval has another big perk. It not only makes your offer stronger, it also shows sellers you’ve already undergone a credit and financial check. When a seller sees you as a serious buyer, they may be more attracted to your offer.
As mortgage rates trend down, more buyers are going to be ready to jump back into the market. And while demand is still limited right now, there’s the potential for competition to pick back up. So make sure you’re putting yourself in the best position possible when you find a home you love.
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