On the road to becoming ahomeowner? If so, you may have heard thetermpre-approval get tossed around. Lets break down what it is and why its important if youre looking tobuy a homein 2024.
What Pre-Approval Is
As part of thehomebuying process, your lender will look at your finances to figure out what theyre willing to loan you. According toInvestopedia, this includes things like your W-2, tax returns,credit score, bank statements, and more.
From there, theyll give you a pre-approval letter to help you understand how much money you can borrow.Freddie Macexplainsit like this:
A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. . . . Keep in mind that the loan amount in the pre-approval letter is the lenders maximum offer.Ultimately, you should only borrow an amount you are comfortable repaying.
Now, that last piece is especially important. Whilehome affordabilityis getting better, its still tight. So, getting a good idea of what you can borrow can help you really wrap your head around the financial side of things. It doesnt mean youshouldborrow the full amount. It just tells you what youcanborrow from that lender.
This sets you up to make an informed decision about your numbers. That way youre able to tailor yourhome searchto what youre actually comfortable with budget-wise and can act fast when you find a home you love.
Why Pre-Approval Is So Important in 2024
If you want to buy a home this year, theres another reason youre going to want to be sure youre working with a trusted lender to make this a priority.
Whilemore homesare being listed for sale, the overall number of available homes is still below the norm. At the same time, the recent downward trend inmortgage ratescompared to last year is bringing more buyers back into the market. That imbalance of more demand than supply creates a bit of a tug-of-war for you.
It means youll likely find you have more competition from other buyers as more and more people who were sitting on the sidelines when mortgage rates were higher decide to jump back in. But pre-approval can help with that too.
Pre-approval shows sellers you mean business because youve already undergone a credit and financial check. As Greg McBride, Chief Financial Analyst atBankrate,says:
Preapproval 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 preapproval means youve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.
Sellers love that because that makes it more likely the sale will move forward without unexpected delays or issues. And if you may be competing with another buyer to land your dream home, why wouldnt you do this to help stack the deck in your favor?
Bottom Line
If youre looking to buy a home in 2024, know that getting pre-approved is going to be a key piece of the puzzle. With lower mortgage rates bringing more buyers back into the market, this can help you make a strong offer that stands out from the crowd. When you are ready to buy or sell your home, please call me, Marie McLaughlin 727-858-7569.
Source:https://www.keepingcurrentmatters.com/2024/02/07/why-pre-approval-is-even-more-important-this-year/
