In many markets across the country, especially in West Michigan, the number of home buyers outnumbers the number of homes on the market. This competitive marketplace makes buyers wonder “How can we stand out?”. One way to show that you are serious about buying a home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Getting pre-approved is one of many steps that shows sellers you are serious about buying, and it helps speed up the process once your offer is accepted. Pre-approval also helps you understand your budget and gives you confidence when presenting an offer.
Homebuyers do tend to overestimate the down payment and credit scores necessary to qualify for a mortgage. This is when reaching out to a local mortgage lender is recommended. One of the many advantages of working with a local real estate professional is that we have relationships with lenders who will be able to help you through this process.
Freddie Mac lays out 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.”
Once you have selected a lender, you will need to fill out their loan application and provide them with important information.
Freddie Mac describes the “4 Cs” that help determine the amount you will be qualified to borrow:
- Capacity: Your current and future ability to make your payments.
- Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash.
- Collateral: The home, or type of home, that you would like to purchase.
- Credit: Your history of paying bills and other debts on time.
If you are ready to buy, you may be pleasantly surprised at your ability to do so. Simply start with getting pre-approved and then have fun searching for your dream home.