Why Is It Important to Be Pre-approved Before You Buy a Home?

Lisa Wenzel September 19, 2024

You may have been asked by a Real Estate agent if you are pre-approved to buy a home. Pre-approval is a great first step in the homebuying process. But why is it so important? Buyers are often tempted to look for their dream home outside of their budget. So, before you start shopping around, it’s helpful to know your price range. You should also know how much money you can borrow from the mortgage lender and your comfort level with the monthly mortgage payment. Pre-approval from a lender is the only way to do this.

Pre-Approval Letter

According to a recent survey from realtor.com, many buyers are making the mistake of skipping the pre-approval step in the homebuying process. They said, “Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.”

The pre-approval letter shows sellers you’re a qualified buyer, something that can really help you stand out from the crowd in the current ultra-competitive market. And today’s market is extremely competitive, especially among buyers.

With limited housing inventory, right now there are many more buyers than sellers, and that’s creating competition. According to the National Association of Realtors (NAR), homes are receiving an average of 2.9 offers for sellers to negotiate, so bidding wars are heating up.

Pre-approval shows homeowners you are a serious buyer. It helps you stand out from the crowd if you get into a multiple-offer scenario. And nowadays, it is likely to get multiple offers. When a seller knows you’re qualified to buy the home, you’re in a better position to get the bid and the home of your dreams.

What the Experts Have to Say

Danielle Hale, Chief Economist for realtor.com stated, “For ‘a buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home."

In addition, today’s housing market is also changing from day today. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You are going to need guidance from a team of professionals (real estate agent and mortgage loan consultant) to make sure you take the right steps along the way.

In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. If you are looking to purchase a new home this year, contact a real estate agent at Wenzel Select Properties. Call us today at (630) 430-4790, or send us an email. Wenzel Select Properties’ future location is 4941 Main Street in Downers Grove, Illinois. Our real estate office is in the heart of downtown Downers Grove. We are just minutes away from Interstates 88, 355, 55, 290, and 294. Our real estate brokers are available to meet with you 7 days a week – Monday through Sunday.