Lately, the number of buyers searching for a dream homes often outnumbers the number of homes actually for sale. This creates a competitive market where buyers need to stand out from one another. The best way to show you are serious is to get Pre-Approved for a mortgage at the beginning of your search.
Even if your market is not as competitive, knowing your budget gives you confidence as you shop for your dream home.
Freddie Mac states the advantages of Pre-Approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
Finding a good lender is an essential first step in this process. Once you have selected a lender, you need to provide information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that determine how much you will be qualified to borrow:
- Capacity: Your current and future ability to make payments
- Capital or cash reserves: The money, savings, and investments you have
- Collateral: The home, or type of home, you would like to purchase
- Credit: Your history of paying bills and other debts
Getting Pre-Approved shows home sellers you are serious about buying, and it often helps speed up the process once your offer has been accepted.