3 important reasons to get preapproved for a mortgage right now
Buying a house isn't easy. Not only do you have to find the right house for you in the right price range, but you also have to make sure your finances are in order so you can qualify for a mortgage loan.
If you wait to apply for a mortgage until after you've found the house you want, time can be a factor. With housing stock generally low right now, there may be other people who want to buy the home you want, and if there is a hiccup in your financing, it could cause you to lose your chance at your dream home.
Getting preapproved for a mortgage could make the homebuying process go much smoother, however. Here are a few reasons to get pre-approved for a mortgage today if you're trying to buy a home.
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3 important reasons to get preapproved for a mortgage right now
As with many things in life, preparation is key when it comes to buying a home, says Nick Narodny, the founder and CEO of Aalto, an online homebuying platform.
"The best advice is to be ready," Narodny says. "The way you're ready is preapproval and watching the market every day."
With that in mind, here are a few reasons to get pre-approved for a mortgage as soon as you're ready to get serious about buying a home.
The competition is fierce
In 2023, home inventory was low, and there were lots of people trying to buy from a relatively small pool of available homes. There are many reasons for this, but one of the primary reasons was that mortgage rates increased in 2022 and 2023 as the Federal Reserve raised the federal funds rate in an attempt to fight inflation. In turn, many homeowners who would have otherwise listed their homes and bought a new one decided to stay put to keep their lower mortgage rates.
However, many experts believe that mortgage rates will fall in 2024, which could increase the number of sellers. That could also entice more people to buy, though.
"There will be more inventory, but homes will sell pretty fast," says Narodny.
With fierce competition for houses, a preapproval could increase the possibility of your offer being selected, especially if multiple buyers make an offer on the home. A preapproval means there is less of a chance of your financing falling through, and that lower risk could be a big plus for the seller.
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You'll know how much house you can afford
One of the most important steps when buying a home is determining what you can afford to spend. Getting preapproved gives you an idea of how much you can spend and lets you tailor your search to houses in that range. But if you don't get a preapproval, you're simply guessing what your budget is.
For example, you think you can afford a $800,000 home with a $100,000 down payment, but if you haven't gone through the pre-approval process, you may end up surprised if you only qualify for a $500,000 mortgage loan. If you have already put an offer on a home that you can't afford, it's a waste of time for you, your agent and the seller. But getting preapproved forces you to be realistic and search for homes in the correct price range.
You'll be taken more seriously
Home sellers often want the most streamlined selling process possible. They don't want to gamble on a deal that may fall through.
And, getting preapproved makes it clear to sellers and their agents that you are a serious buyer who is set on buying a home. If you don't have pre-approval and another potential buyer does, the seller may choose the other offer, as there is a chance that your finances are not in order.
The bottom line
Pre-approval for a mortgage does not take long and it can make your homebuying process much easier. You'll know exactly what your price range is, and potential sellers will know that you are serious – and may end up picking you over another bidder who isn't as prepared.
