5 Reasons You Need a Preapproval
One of the first questions an agent is going to ask you when you start your home search is "Have you been preapproved by a lender?"
Typically, there are three responses that I get to that.
The first one is a blank stare and/or panic - "Whaaaat?"
The second is suspicion - "I don't really want to do that yet."
And the third is any agent's favorite answer - "Yes!"
It's important to know that your agent isn't trying to trick you - they are trying to help! Here are five important reasons that you need a preapproval before you start your home search.
Number One: Set Realistic Expectations
Getting your preapproval letter first really helps you set and manage your expectations. Searching for your home is so much fun. But here’s the thing, just because you feel comfortable buying a $500,000 home doesn’t mean that that is what a lender is going to approve you for. So, you could be looking at these $450k to $500k homes only to be told that you’re approved for $250,000.
What do you think the odds are that you’re going to find something you love in that $250K price range after comparing them to a $500K home?
Number Two: Create a Credit Action Plan
If credit is an issue, it gives your lender an opportunity to create an action plan to help maximize your purchasing power. Look, I get it. Stuff happens. You get behind on your bills, rack that old college credit card crept back up again, forgot to make a payment ... but unless you actually apply and have a professional looking at your credit, you don’t always know what you need to fix and how to fix it. Having a lender pull that information and look at it helps you figure out how you need to move forward to be able to maximize your purchasing power.
Number Three: Lets You Shop Around
In a hot market, sellers are getting multiple showings and offers in the first 48 hours. Some sellers want to make sure that the buyers that are walking through their home are already preapproved. If that's the case, your agent isn't going to be able to get you in to see that home with that stipulation the seller requires.
Number Four: So You Can Jump on Your Dream Home
There’s nothing worse than walking into a home and finding that it is in the perfect location, it has the perfect amount of space, it’s the perfect price – everything is just Perfect, … and you’re not able to make an offer as soon as possible.
Number Five: You Can Close Quicker
When you have a verifiable preapproval letter in hand, chances are your lender has a variety of paperwork that you had to submit to get that preapproval letter. All of that paperwork along with some additional documents that they’re going to request is needed to get the underwriting done for your loan. With that being said, having all of that stuff already submitted to your lender is going to make the process go quicker. Now, why does that matter? Because at the end of the day, time is of the essence. When you have multiple offers, it comes down to contingencies. Someone who can close within 30 days looks a lot more attractive as opposed to someone who may take 45+ days to close.
There you have it! Those are the top five reasons why you really need to make sure to get your preapproval letter before you start your home search. If you have additional questions about the lending process or getting your preapproval letter, I have some of the most amazing lenders on speed dial that are able to help answer your questions.
Happy house hunting!
