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Here’s What Mortgage Preapprovals Mean In 2020
Talk with an expert loan officer, and they’ll quickly share with you what mortgage preapprovals mean for your success in buying a home. The current housing market is continuing to prove just how vital this conversation is.
A mortgage preapproval has always provided a competitive advantage for home buyers. Public health concerns and economic changes are reinforcing this fact. More than ever, mortgage preapprovals are an indispensable step towards a smooth real estate transaction.
We’re sharing what mortgage preapprovals mean for you in the current housing market. Read on for expert insights designed to give you an edge.
Understanding the current housing market
It’s crucial to understand what’s going on in today’s housing market, along with the role preapprovals have in getting your offer accepted.
First, let’s quickly go over the difference between pre-qualification and preapproval:
- Pre-qualification – This is a less intense application process intended to give potential borrowers a sense of their ability to borrow.
- Preapproval – A mortgage preapproval requires a comprehensive financial application, which results in the borrower receiving a letter stating how much they are approved to borrow. This preapproval letter is valid for typically 90 days.
A mortgage preapproval is a commitment from a lender that they have determined you are eligible to borrow a set amount of funds. This determination is made after a credit check, income verification, debt analysis, and other financial aspects are weighed.
This places you in a more ‘official’ position with real estate agents and sellers. You’re now able to prove exactly how much home you can afford. This is a typical example of how getting pre-approved gives you significant advantages.
As for today’s housing market? Well, new challenges and opportunities have created additional benefits of getting pre-approved. Let’s see what they are.
Mortgage preapprovals are the norm in abnormal times
Think about it. Interest rates have been cut, housing inventory is low, and the market is flooded with new buyers. Buying a home today is like a tightrope act, and you’re going to need every advantage possible.
Real estate professionals won’t work with you
Due to public health concerns, real estate professionals have adopted new guidelines around mortgage preapprovals. In today’s market, a real estate professional may decline to show you homes without a mortgage preapproval. This reduces unnecessary contact that could place all parties at risk. Plus, these professionals know how tight the market is, so they want to work with clients whom they know are in a position to hit the ground running, so-to-speak.
Sellers want you to be pre-approved
Sellers also know that low rates are enticing new buyers into the market. Most importantly, they also know that these buyers are competing against each other for their homes.
In short, it’s a seller’s market. More buyers and lower inventory place sellers in a favorable position. Why would they entertain someone who has not been pre-approved for a mortgage? They wouldn’t. Sellers are looking for a smooth transaction just like you are.
What’s it all mean?
Mortgage preapprovals mean two things, really:
- It should be considered an essential first step in buying a home. Real estate professionals request preapprovals before working with clients. As for sellers? They’re highly likely to engage an offer from someone who has a mortgage preapproval letter that’s good for 90 days.
- Mortgage preapprovals help you compete against an influx of new buyers.
The current economic landscape and public health guidelines have only strengthened the need for a mortgage preapproval. Make sure you’re not left out of today’s housing market and take the steps needed to get pre-approved for a mortgage.
Make the next step your first
Whether it’s your first time buying a home or your moving on to your next property, we’re here to ensure your success.
Apply for a mortgage online with our easy-to-use application tools. Still have questions? No problem. Speak with one of our expert loan officers for more information about getting your mortgage preapproval.