With home inventory increasing and mortgage rates starting to come down, you might be thinking this is finally your moment to jump into the Brookings area real estate market. But before you start shopping for your dream home, there’s one crucial step you need to take: getting pre-approved for a mortgage.
The pre-approval process involves a lender reviewing your financial information, such as your W-2s, tax returns, credit score, and bank statements, to determine how much they are willing to loan you. Once this is done, you’ll receive a pre-approval letter, which is your golden ticket to house hunting. Here are two big reasons why this is a must in today’s real estate market.
Pre-Approval Helps You Understand Your Budget
Although home affordability is starting to improve, it’s still a bit tight for many buyers. That’s why it’s smart to talk to a lender early on about your loan options and how changing mortgage rates will affect your monthly mortgage payment. Pre-approval is the perfect time for this conversation.
Not only does pre-approval give you a clear picture of the maximum amount you can borrow, but it also helps you figure out how much you’ll pay monthly. As Investopedia explains:
“Consulting with a lender and obtaining a pre-approval letter allows you to discuss loan options and budgeting with the lender; this step can clarify your total house-hunting budget and the monthly mortgage payment you can afford.”
This financial insight will allow you to focus your home search on what you’re actually comfortable with spending. Even though mortgage rates have dropped recently, making homes a little more affordable, you still want to avoid stretching your budget too thin. As CNET points out:
“In many cases, a lender may preapprove you for more than you need to spend on a home. And while it can be tempting to look at houses outside your budget, it won’t help you in the long run. Before you start touring homes, figure out how much you can realistically afford and stick to your budget.”
Pre-Approval Makes Your Offer Stand Out
Once you’ve found a home within your budget, pre-approval has another important benefit. It strengthens your offer and shows sellers that you’ve already passed a credit and financial check. When sellers see that you’re a serious buyer with pre-approval, they are more likely to accept your offer over someone who hasn’t gone through the process. As Greg McBride, Chief Financial Analyst at Bankrate, explains:
“Pre-approval carries more weight because it means lenders have actually done more than a cursory review of your credit and your finances, but have instead reviewed your pay stubs, tax returns and bank statements. A pre-approval means you’ve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.”
With mortgage rates trending down and more buyers ready to re-enter the market, competition could start picking back up, especially in hot markets like the Brookings community area. Pre-approval helps you stand out in a competitive market, giving sellers confidence that your offer will go through without a hitch.
Bottom Line
If you’re thinking about buying a home in Brookings, South Dakota area, getting pre-approved for a mortgage should be one of the first steps you take. Not only does it help you understand what you can afford, but it also makes your offer more attractive to sellers. Reach out to a lender today and get pre-approved so you can confidently navigate the Brookings housing market and find the home of your dreams.
Posted by Shane Andersen on
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