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Why is preapproval so crucial today? In this today’s market, being intentional and competitive is vital, and preapproval gives you that edge. Here are a few reasons why:
Know Your True Price Range:
Preapproval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Editor of The Mortgage Reports, Peter Warden, states that:
“The lender will check out your personal finances and issue you a letter confirming the amount you’re eligible to borrow. This not only gives you a firm budget for house hunting, but also lets sellers know you’re qualified to make an offer.”
Sellers Know You’re Qualified:
There are more buyers than homes available, creating competitive bidding wars. According to the National Association of Realtors (NAR), the average home gets 4.8 offers per sale. Your preapproval gives you a leg up in these situations. You know what you’re approved to borrow before you write your offer, and the seller knows you’re qualified to buy their home. Along with this, this helps both you and the seller feel confident in what you’re bringing to the table, giving you a better position to win a bidding war potentially.
Peter Warden states,
“There’s another important reason to get preapproved, too. And that’s because there are way more buyers than homes in today’s market — which means you need to be ultra-prepared if you want to win a bidding war. Most sellers are getting multiple offers right now. And most won’t even entertain an offer without a preapproval letter included.”
You Can Lock In Your Mortgage Rate:
With mortgage rates rising, you want to do everything in your power to lock in the lowest rate possible. Preapproval gives you that chance. When you’re preapproved, your loan is essentially approved, pending a home appraisal. This means that if rates rise before you find a home, you’re still getting the lower rate. Whereas if you get prequalified, which is based on an estimate of the loan amount, your interest rate isn’t locked in and could be subject to change.
A Solid Foundation for Your Home-Buying Journey:
Preapproved gives you a firm foundation as you start your home-buying journey. You know exactly how much money you can borrow and what you can afford. You’re not going into the process blind and are instead armed with the knowledge and tools you need to be successful.
