When you are ready to find your next home, the last thing you want to do is limit your possibilities. How disappointing would it be to find your dream home, only to learn that you don’t qualify for financing to make the dream come true? If you don’t earn a loan preapproval before you begin your home search, you may actually prevent yourself from finding and buying the home of your dreams.
Most homeowners begin their search by browsing homes for sale online to establish an idea of neighborhood and housing styles they prefer. If you don’t know what you can afford, you may be looking beyond your price range and wasting a great deal of time. On the flip side, you may also be looking below what you would have qualified for and end up without your dream home.
If you begin this process with a preapproval, you will be able to sort by price, identify appropriate neighborhoods and locate “the one” much faster.
Most realtors prefer to work with home buyers who have a preapproval in hand for two reasons:
With a preapproval in place, a realtor knows that the deal isn’t likely to fall through.
When they know what you want and what you can afford, realtors are able to do a better job of locating the perfect home.
For example, if you tell your realtor that you you’re interested in a historic home, s/he knows the asking price for these homes varies widely. Without a preapproval outlining what you can afford, a general search across several price ranges can be done, but risks missing hidden gems.
On the other hand, if you have a preapproval, your realtor will know exactly what to focus on and can suggest different neighborhoods, sizes and conditions of homes to match your needs, making it easier to get you exactly what you want.
Once you’ve located the perfect home, the next step can go two different ways depending on a preapproval. You’re taking a gamble any time you make an offer on a home without preapproval. Realtors and sellers are often less willing to accept offers from a buyer without a preapproval. Odds are they will move to the next offer and you will miss the opportunity to purchase.
However, preapproval affords you more room to haggle. Sellers may be more willing to lower the asking price, include appliances, cover closing costs or make other allowances to work with a preapproved buyer.
Skipping the preapproval step can wreak havoc on a buyer’s stress level. If you aren’t preapproved, chances are you will spend more time searching for houses, all the while feeling you may not be getting great service from your realtor. Worst case scenario, you may get turned down once you’ve made your offer. All of this adds more time and stress to what should be an incredibly exciting time in your life.
Preapproved buyers know they’re qualified, that lenders are willing to work with them and they can make offers with confidence.