Shopping for a home should be an exciting experience. With so many houses to choose from, it can be tempting to start touring homes and going to open houses without first getting pre-approved. However, there are some very important reasons why you should get pre-approved before you begin looking for that dream home. Here are my 3 key factors to keep in mind when starting your homebuying journey:
1. Getting pre-approved allows you to know your maximum purchase price. In today's market where rates have increased considerably, it is critical to know the maximum purchase price you're at ease with before you fall in love with a home you can't comfortably afford.
2. Your lender will also provide you with various rate programs and options for your needs. Are you a first-time homebuyer? Are you a physician with a great-paying job but a lot of student debt? Are you putting down less than 20%? Getting a 30-year fixed mortgage is not always the best option anymore, especially in today's market where an adjustable-rate mortgage (ARM - for 5, 7 or 10 years) will be lower and possibly all you need. Ask yourself is this my forever home or is the plan to move in 5, 7 or 10 years?
3. Ask your lender about going one step further to get a commitment and not just a pre-approval. A commitment signals all the underwriting is done before you go under agreement on your new home, so it lets the sellers and their listing agent know that not only are you qualified but you can confidently say the work has been done to get you to the closing table. All you need is an appraisal, title, and insurance binder to close and that can usually be rushed enabling you to close as quickly as 2-3 weeks after your P&S (purchase and sale) is signed. Whether you have 5% or 20% down, you will be an excellent option for the sellers. Another great thing about pre-approval and commitment letter? They’re both valid for 90 days!
Choosing a mortgage lender is a big decision. It's important to do your research and pick a lender that you feel comfortable with and has a great reputation. If you're unsure, ask your REALTOR® for a recommendation. They usually have 2+ great partners that will ensure get you to that closing table quickly!