If you are thinking of buying a home this spring, 2023, or anytime afterwards, this is the one thing you must do before you even think of looking at homes. If you’re not pre-approved, some agents may tell you get the hell out of my car. No, actually they won’t say that, but they’ll think about it. So what is that one thing that you have to do before you even start off thinking of buying a house or looking at homes? It is to get pre-approved.

So what is so important about getting pre-approved? Well, let’s talk about that. It is one of the most important things you can do to start the buying process and to get your dream home. By the way, if you’re thinking about buying a house or even considering buying a house, congratulations. That’s a great thing to do. To understand what a pre-approval is, it’s important to understand what it is and why it’s needed.

A pre-approval is basically a green light from the lender that they have checked your tax records or income and your debt and they are ready to give you a loan, a maximum amount of loan, based on your income, based on your debts. So they will tell you, “Hey, you can have a mortgage payment of $2,000 a month, or $3,000 a month, or $5,000 a month. And they will give you a limit of how much of a house you can buy, whether it’s $450,000 or $800,000, or $2 million based on your down payment. So based on your income, your debts, which could include your car payments, your student loans, child support, credit card bills, any other payments. Not the amount of loan amounts that you owe to the car or to their credit cards or for appliances, but the monthly payments. That’s what’s important. So they look at your total debt that you owe in car payments, student loans, or whatever. They look at your total income and your credit score. And based on that, they will give you a number of how much you can afford to pay and how much of a house you can buy.

As you know, this is a challenging market. Prices are high, interest rates are high. So if you were approved two years ago or a year ago and for some reason, you did not buy and now you want to buy, those numbers have changed. So you need to get pre-approved again. So in this challenging market, you want to be well-qualified, well prepared. So if you find a house and if you go see a house, hopefully after pre-approval, then you are ready to make an offer and get the house that you want. H

Few years ago, with the COVID that was in play, the whole system of showing homes got changed, not only because of COVID but because of the multiple bidding and the crazy market that was. So if I was to show you a home, if I call a seller and say, I’ve got a buyer who wants to see a home, the seller’s agent would call me and say, okay, you can see the home. This was in COVID conditions and high market bidding conditions. They would say, okay, send me the pre-approval letter, or an approval letter, send me the proof of funds. Only then we can show the homes, because, number one, they did not want people coming in and out unless they were qualified to buy a house.

If I was qualified up to $800,000, and I’m showing you a house for 900 or a million dollars, what’s the point showing it? One, you’re wasting my time as a buyer’s agent, and number two, you’re wasting the seller’s agent’s time and the seller’s time. So now it has become a norm to see homes. And even now, as of April 2023, multiple bidding has started. There are 20-30 people seeing the homes within the first week. So if I was a seller’s agent, I would ask your agent if you were a buyer and if you had a buyer’s agent, to send me a pre-approval letter and the proof of down payment so you can see how important it is to get pre-approved.

So if you’re a serious buyer or if you’re thinking of buying a house, here’s how the pre-approval process, or getting pre-approved and approved, really helps you. One, you know exactly what your payments are going to be and can you afford them. And hopefully, your lender will tell you exactly how much you can afford based on your income and all your debts, car payments, loan payments, students loan, child support, medical bills, any other bills. So you know exactly how much your payments are. The second thing they’ll tell you is that they’ll give you a limit on how much you can buy, whether it’s a $450,000 to $200,000 purchase price or a million-dollar purchase price, based on if you’re putting 5% down, 10% down, 20% down or even if you’re getting a VA loan or a government loan with only three and a half percent down.

So that’s the two advantages. The other advantage is that if for some reason you make an offer and there are multiple offers, and you prove to the seller and the seller’s agent that you’re already pre-approved, they may call your lender and verify that you have your letter showing that you are approved for a certain amount. And here along with it, you send them a statement of the down payment. That money you have, whether it’s $20,000, $100,000or $10,000, you’re sending them a statement with the offer along with a pre-approval letter. Then you look very strong and you have a better chance of getting that house. So good luck on buying your purchase. Hope you get approved.