Why Pre-Approval Is More Important Than Ever This Spring

by Ryan Ivemeyer

Why Pre-Approval Is More Important Than Ever This Spring




Spring marks the peak season in real estate, bringing increased buyer activity and competition. To navigate this effectively, securing a mortgage pre-approval is crucial before house hunting.

Many buyers delay speaking with a lender until they find their ideal home, but in a fast-moving market, this approach is risky. Pre-approval sets you ahead by clarifying how much you can borrow based on your financial history, as outlined by Yahoo Finance:

  • Debt-to-Income (DTI) Ratio: Your debts versus your income, where a lower DTI often means you can borrow more.

  • Income and Employment: Lenders check for stable income to ensure you can repay the loan.

  • Credit Score: A higher score could increase the amount you’re eligible to borrow.

  • Payment History: Timely bill payments indicate you're a reliable borrower.

Receiving a pre-approval letter not only clarifies your budget but also enhances your buying confidence and can expedite the closing process since your lender already possesses much of your financial info.

Understanding your budget is vital in a competitive market to prevent emotional decisions that could stretch your financial limits. As Freddie Mac notes, knowing your budget helps keep your spending in check:

“​Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”

Use this time to tighten your budget and consider all costs associated with homeownership, like property taxes, insurance, and possibly homeowner's association fees. This ensures you're only looking at homes within your financial reach.

Work with your agent to focus your search based on your budget, avoiding the disappointment of falling for a home you can’t comfortably afford.

Being pre-approved not only streamlines your search but also enhances your position in the competitive spring market. It signals to sellers that your finances have been vetted, which makes your offer more appealing. Zillow notes that a pre-approval letter demonstrates to sellers that you’re a serious buyer, which is crucial during the busy season when multiple offers are common.

“Having a pre-approval letter handy while you’re shopping for a home can also help you act quickly once you’ve found a home you love. The letter shows potential sellers that you’re a serious buyer who has the financial means to close on the home. In a competitive market, an offer with a pre-approval letter attached will stand out among other offers that don’t include one — increasing the chances of your offer being accepted."

This means that when sellers are considering multiple offers, yours might stand out simply because you've taken the step to get pre-approved.

After receiving your pre-approval letter, it's crucial to avoid any major financial changes like switching jobs, applying for new credit, co-signing loans, or significant shifts in your bank accounts. These changes could jeopardize your pre-approval status.

Bottom Line

If you're planning to buy a home this spring, start by getting pre-approved. This will clarify your budget, demonstrate your seriousness to sellers, and prevent you from pursuing homes beyond your financial reach. Begin by talking to a lender.

Are you ready to navigate this competitive market? Let's discuss how to prepare you for buying a home.

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Ryan Ivemeyer

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+1(815) 342-6942

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