Why Pre-Approval Is More Important Than Ever This Spring

Spring is here, and so is the busiest season in real estate. More buyers are out looking for homes, which means more competition for you. If you want to put yourself in the best position to buy, there’s one step you can’t afford to skip, and that’s getting pre-approved for a mortgage.

Some buyers think they can wait until they’ve found a home they love before talking to a lender. But in a season where homes can sell fast, that’s a risky move. Getting pre-approved before you start your search is a much better bet.

What Is Pre-Approval?
Pre-approval gives you a sense of how much a lender is willing to let you borrow for your home loan. To determine that number, a lender starts by looking at your financial history. Here are some of the factors that can have an impact, according to Yahoo Finance:

• Your debt-to-income (DTI) ratio: This is how much money you owe divided by how much you make. Usually, you can borrow more if you have a lower DTI.
• Your income and employment status: Lenders want to verify you have a steady income to ensure you can repay the loan.
• Your credit score: A higher score may qualify you to borrow more.
• Your payment history: Consistently paying your bills on time shows lenders you’re a responsible borrower.

After their review, you’ll get a pre-approval letter showing what you can borrow. This step helps you feel more confident in securing a loan and can also speed up the closing process since the lender will already have much of your financial information.

It Helps You Figure Out Your Budget
Spring is a competitive season, and emotions can run high if you find yourself up against other buyers. Having a firm budget is crucial—you don’t want to max out your borrowing capacity. As Freddie Mac explains:

“Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”

Use this time to finalize your budget and consider other homeownership costs, like property taxes, insurance, and homeowners association (HOA) fees.

Then, work with your real estate agent to search for homes within your budget, so you don’t fall in love with a house that’s out of reach.

It Helps Your Offer Stand Out During the Busy Season
Spring buyers aren’t just competing for homes—they’re also competing for the seller’s attention. A pre-approval letter can help you stand out by showing sellers you’ve already gone through a financial check. As Zillow explains:

“Having a pre-approval letter handy while you’re shopping for a home can also help you act quickly once you’ve found a home you love. The letter shows potential sellers that you’re a serious buyer who has the financial means to close on the home. In a competitive market, an offer with a pre-approval letter attached will stand out among other offers that don’t include one — increasing the chances of your offer being accepted.”

That means when sellers are choosing between multiple offers, yours could rise to the top simply because you’ve already taken this step.

Important Tip: Keep Your Financial Situation Stable

After you receive your pre-approval letter, avoid:

• Switching jobs
• Applying for new credit cards
• Taking out new loans
• Co-signing for someone else’s loan
• Moving large amounts of money in or out of your savings

Any changes to your finances could affect your pre-approval status.

Bottom Line
If you’re thinking about buying a home this spring, getting pre-approved should be your first move. It’ll help you understand your budget, show sellers you’re serious, and keep you from falling in love with a house that’s out of reach. Talk to a lender to get started.

What’s your plan to stand out in this competitive market? Connect with an agent to make sure you’re fully ready to buy.

 - by KCM Crew