How Home Loan Pre-Approvals Give Buyers the Advantage
Mortgage pre-approvals give buyers the advantage when negotiating with sellers. The housing market is more competitive than ever, and bidding wars are a new hurdle in many transactions. Plus, mortgage guidelines have tightened. Lenders are increasing documentation requirements and following these more closely. A pre-approval gets you through much of the loan process and uncovers potential pitfalls before becoming bound by a contract to purchase.
Pre-Approvals Help Borrowers Understand the Best Options for Their Financial Situation Including:
- The price range that is best for you
- How much cash you need to close
- Your maximum monthly payment
If borrowers understand their limits, it helps to negotiate with confidence. Since sellers like a sure thing, you’ll have an advantage over buyers who may not have been through the process.
Added Confidence in a Competitive Housing Market
In today’s fast-paced housing market, pre-approval doesn’t just help with negotiations; it also allows buyers to act more quickly when they find the right home. Many homes are receiving multiple offers within days—or even hours—of listing, so pre-approved buyers are more agile. They have already completed much of the initial paperwork and credit evaluation, meaning they’re in a better position to make offers without delays.
When sellers review offers, a pre-approval letter signals that financing is unlikely to fall through. This assurance can make your offer stand out, especially in situations where sellers are balancing several similar bids. In some cases, being pre-approved may even give you leverage to negotiate on price or request favorable terms, like extended move-in timelines or repair credits.
How Long is the Pre-Approval Valid?
Pre-approvals are typically good for the “shelf life” of the documents used. These include credit reports, pay stubs, bank statements, W-2s, tax returns, and more based on the specific situation. The usable life of these documents will vary, yet it’s usually safe to say that the approval is good for up to three or four months.
During this time, keep all important financial documents and have them readily available for future updates.
What If I Change My Mind on the Purchase?
That’s perfectly fine! There’s no obligation to purchase a home or use a certain loan program after the pre-approval phase. Pre-approvals help to ensure that borrowers know what’s involved, are comfortable with a price range, and are ready to make a move.
In fact, going through the pre-approval process offers borrowers a chance to gain more clarity about the mortgage market and what they can realistically afford. Understanding interest rates, potential monthly payments, and the breakdown of associated fees can help borrowers feel more comfortable moving forward when they’re ready.
Financial Preparedness Pays Off
When you have home financing in place before making an offer, the process of purchasing a home is easier for borrowers. You’ll avoid the last-minute scramble to pull documents together, plus the added stress of waiting to see if you qualify. A pre-approval also ensures that if interest rates fluctuate, you may be able to lock in a rate sooner. In a market where rates are unpredictable, locking in a favorable rate when you find a property can make a significant financial difference over the life of the loan.
Let’s Start the Loan Process Today
We’re here to help guide you through the entire loan process. Contact us to learn your mortgage best options and take the first step toward securing your dream home with confidence.