First Step: Get Pre-Approved
A home search should always start with getting pre-approved through a lender of your choice, assuming you are not paying cash for your home purchase. By getting pre-approved, you will be doing the work up front to ensure you are putting your best foot forward when submitting an offer on a home. Here are some reasons why getting pre-approved matters when beginning your home search.
Competitive Market – There are a lot of buyers in the market right now, which means you need to have your ducks in a row when making an offer. By having a pre-approval letter from your lender, it shows a seller that you are a serious buyer and that you can afford the home. Many sellers will not accept an offer unless the buyer has been pre-approved; therefore, getting a pre-approval prior to beginning your home search means you will be fully prepared to make your best offer possible when the perfect home for you comes around.
Know Your Budget – Going through the pre-approval process with your lender means all of your finances will be reviewed. Your debt to income ratio, monthly expenses, credit score, and income will be evaluated to determine what you can comfortably afford in a total home purchase, downpayment, and monthly mortgage payment without being house broke. This will provide you with information on what homes you should consider when looking at your monthly expenses, yearly taxes, and possible home ownership association dues so that you do not break your budget.
Reduce Stress – Going into a home search without a pre-approval can make for rocky waters. The unknown of how much you can realistically afford and the scrambling to get financing in place when trying to make an offer can make your home search a stressful experience. By working with a lender right away, you will be more knowledgeable from the get-go, your realtor will have a better idea of what you are looking for in a home, and you have a higher chance of any offer you submit getting accepted.
In short, getting a pre-approval will increase your negotiation power when submitting an offer, increase the time between contract to closing day, increase the likelihood of your offering being accepted, and it will allow you to decrease the stress by giving you a well-rounded understanding of your limits when purchasing a home.