If you’re thinking of buying a new home this year, sorting out your finances before you start shopping is a smart move. Not only will it give you ample time to find the right lender and loan package, you’ll also reap plenty of other benefits. Here are 4 reasons why it’s a smart move for buyers to get preapproved for a mortgage first.
Know your price range
Not only is knowing how much you can afford the most common question asked before shopping for a home, but it’s also the most important! While you can (and should) estimate your budget with a mortgage calculator, going through the official preapproval process will determine your actual maximum loan amount, something online calculators aren’t capable of doing.
Preapprovals initiate a hard credit inquiry; looking deep into your actual credit history to gauge your creditworthiness. Not only will you receive a maximum loan amount, but it’ll also itemize additional costs including interest rate, monthly payment, and closing costs, giving you the information needed to determine your ideal price range (you don’t have to borrow the full amount you’re qualified for) and create an attainable budget. If you don’t qualify for a mortgage, you’ll know why and learn how to improve it before reapplying.
Knowing your ideal price range will define your home search and the properties you see, reducing the risk of falling in love with a home that is outside your budget.
Seen as a serious buyer
Preapprovals aren’t required but they may be depending on how competitive your market is. In fact, some real estate agents won’t show homes to buyers without a pre-approval letter. Preapproval letters show that you’re ready and willing to buy a new home, making you appear as a more serious buyer. This can give you a leg up over a buyer with a pre-qualification in a multiple-offer situation.
More room to negotiate
When sellers know a buyer is qualified and ready to purchase, they’re more open to negotiating. That’s because they know the sale is almost a sure thing – there is less risk in going through closing only to realize the buyer isn’t able to secure financing.
You’ll close sooner
Being pre-approved typically speeds up the closing process. It takes about 50 days to close on a house on average depending on the loan type, with mortgage approvals accounting for some of that delay. When you come into closing with financing already secured, you can reduce the time it takes to complete the process since you can then jump ahead to the next steps like appraisals and inspections.
If buying a new home in the Bay Area is in your plans this year, getting your credit ready to take on a mortgage is a smart first move to make. This will make sure you’re ready to buy your dream home when you find it.
SummerHill Homes wants to help ensure a pleasant and smooth lending experience for you. We recommend reaching out to one of our preferred home lenders when you’re ready to begin the mortgage process and purchase a new SummerHill home.
Visit us at SummerHillHomes.com to learn more about our communities, view virtual tours, schedule a private tour and get ready to find your new home.