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If you’re planning to buy a home this year, one of the first steps on your journey is getting pre-approved. Especially in today’s market when mortgage rates are higher than they were just a few months ago, getting a mortgage pre-approval can be a game changer. Here’s why.

What Is Pre-Approval?

To better understand why pre-approval is key, it’s important to know what pre-approval is. The Mortgage Reports explains it like this:

“When you’re ready to take the leap into homeownership, your first step is mortgage preapproval. . . . A mortgage preapproval is when a lender determines you’re qualified for a home loan. Your preapproval letter shows the maximum loan amount you’re approved for (your home buying budget), as well as the specific interest rate and loan term you can expect.”

As part of the pre-approval process, a lender will look at your finances to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter to help you understand your true price range and how much money you can borrow. That can make it easier when you set out to search for homes because you’ll know your overall numbers. And with mortgage rates rising and impacting affordability, a solid understanding of your numbers is even more important.

Pre-Approval Can Signal You’re a Serious Buyer

Another added benefit is that pre-approval lets the seller know you’re qualified to buy their house. A recent article from realtor.com notes:

“. . . getting pre-approved can actually improve your chances of falling into the sellers’ good graces, and you’ll want to get it done as early as you possibly can in the home-buying process.”

Even though bidding wars are easing this year as the market shifts, preapproval is still an important part of making a strong offer. It can help a seller feel more confident because it shows you’re serious about their home and that you’re a qualified buyer.

Bottom Line

Getting pre-approved for a mortgage is critical. It helps you better understand what you can borrow and shows sellers you’re serious about purchasing their home. Connect with a local real estate professional and a trusted lender so you have the tools you need to succeed as a homebuyer in today’s market.

Buying your first home is a major decision and an exciting milestone. Even though it can feel daunting at times, it has the power to change your life for the better. If you’re looking to purchase your first home, you may be wondering what’s happening in the housing market today, how much you need to save, and where to start.

Here are three things that can help give you the information you need to confidently pursue your dream of homeownership.

1. Consider All Options When the Number of Homes for Sale Is Low

Today, there are far more buyers in the market than there are homes available for sale. When that happens, it’s a good idea to do what you can to increase your pool of options. That could mean expanding your search to include additional housing types. For first-time buyers, considering condominiums (condos) and townhomes can be an excellent way to increase your choices. According to Bankrate:

“Townhomes often cost less than single-family homes of a similar size in the same location.”

In another article, Bankrate also says:

“Buying a condo can be a great way to dive into homeownership without worrying about the upkeep that comes with single-family homes and townhouses.”

Condos and townhomes are both great entryways into homeownership. When you buy either one, you can start building equity which increases your net worth and can fuel a future move.

2. Know Your Down Payment Could Be More Within Reach Than You Think

Saving for a down payment can feel like one of the biggest obstacles for homebuyers, but that doesn’t have to be the case. As the National Association of Realtors (NAR) says:

“One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.”Data from NAR shows the median down payment hasn’t been over 20% since 2005. The graph below breaks down the median down payment by age group for recent homebuyers according to the 2022 Home Buyers and Sellers Generational Trends Report from NAR (see graph below):

Based on the data above, the median down payment for all homebuyers is only 13%. That’s well below the common misconception of 20%, and it’s even lower for younger buyers. This could mean you may not need to save as much for a down payment as you initially thought.

There are also down payment assistance programs available for many buyers. Not to mention, some loan options require as little as 3.5% (or even 0%) down for buyers who qualify. While there are advantages to putting 20% down, especially in today’s competitive market, know that you have options.  To get more information on how much you may need to save and the help that’s available, talk with a professional.

3. Work with a Trusted Real Estate Advisor Throughout the Process

Finally, no matter where you’re at in your homeownership journey, the best way to make sure you’re set up for success is to work with a real estate professional.

If you’re just starting out, they can help you with the initial steps, like educating you on the process and connecting you with a trusted lender to get pre-approved. Once you’re ready to begin your search, a real estate professional can help you understand your local market and search for available homes. And when it’s time to make an offer, they’ll be an expert advisor and negotiator to help your offer stand out above the rest.

Bottom Line

Knowledge is key to succeeding on your homebuying journey. Knowing market trends, what you need for a down payment, and what options you have as a buyer today can give you the confidence you need to buy a home. Let’s connect so you have an expert on your side who can help you navigate the homebuying process.