Do You REALLY Need to Get Preapproved?

Blog posted On January 25, 2024

In the world of real estate, the term "preapproval" often floats around, leaving potential home buyers wondering if it's actually a necessary step in the home buying process. The truth is, getting preapproved for a mortgage is not just a box to check; it can significantly impact your home buying experience.

In this blog post, we'll explore what preapproval is, dive into the benefits it offers, and walk you through the preapproval process, so you can make an informed decision on whether you really need to get preapproved.

What is Preapproval?

Let’s start out with the basics. What is a preapproval? Preapproval is a preliminary assessment by a lender that determines how much you can borrow for a mortgage. It involves a thorough examination of your financial background, credit history, and overall financial health. The lender reviews your income, debt, and credit score to provide you with a specific loan amount for which you could likely qualify.

Is Preapproval Necessary to Purchase a Home?

The short answer is no. You can technically look for a home and put in an offer without a preapproval letter in your hand. However, getting preapproved has a number of benefits that will not only help you stand out as a buyer but will also speed up the home buying process as a whole.

The Benefits of Getting Preapproved

            1.         You’ll Know Your Budget

One of the primary benefits of getting preapproved is that it gives you a clear understanding of your budget. Knowing the loan amount you're eligible for helps you narrow down your home search to properties within your financial reach. It prevents you from falling in love with a home only to find out later that it's out of your price range.

            2.         You’ll Have Increased Negotiation Power

Sellers often view preapproved buyers more favorably. Having a preapproval letter in your hand signals to the seller that you're a serious and qualified buyer. This can give you a competitive edge in a competitive real estate market, potentially leading to more favorable terms and a smoother negotiation process. 

            3.         It’ll Result In a Faster Closing Process

Since a significant portion of the mortgage application process is already complete during preapproval, it can expedite the overall closing process. This can be particularly beneficial in a competitive market where a quick closing may be crucial to both parties.

            4.         You’ll Have Greater Peace of Mind

Knowing that you're preapproved can bring peace of mind in your home search. It eliminates uncertainties related to financing and allows you to focus on finding the right home without the constant worry of whether you'll qualify for a mortgage.

The Process of Getting Preapproved

Now that we've established the benefits, let's walk through the steps involved in getting preapproved.

  1. Gather Necessary Documents:
      1.  Proof of Income (pay stubs, W-2 forms, tax returns)
      2. Employment Verification
      3. Bank Statements
      4. Credit History
  2. Submit Application:
    1. Complete the lender's preapproval application. Be prepared to provide detailed information about your financial situation.
  3. Credit Check:
    1. The lender will conduct a thorough credit check to assess your creditworthiness.
  4. Wait for Approval:
    1. Once your application is submitted, the lender will review all the information and determine the loan amount you're preapproved for. This can take anywhere from seven to ten days.
  5. Receive Preapproval Letter:
    1. If approved, you'll receive a preapproval letter. This document outlines the loan amount, interest rate, and other important details.

Our Advice? Get Preapproved!

If you're serious about buying a home, getting preapproved is an important step in the process. It not only streamlines your home search but also positions you as a strong and reliable buyer.

Ready to take the next step? Connect with a loan officer today to begin the preapproval process.