Learn why pre-approval matters and how to shop for the best lender.
When you’re starting the journey to buy a home, one of the first things to figure out is how much you can afford. It’s tempting to jump straight into the home search, but there’s one crucial step to take first: determining your budget and getting pre-approved by a lender. This process will ensure you know exactly how much you can spend and will position you as a serious buyer in this competitive market.
Before you even start looking at homes, it’s important to understand that most sellers won’t even consider a showing without a pre-approval letter from a lender. This letter shows you’re financially capable and serious about your home purchase, making you stand out as a buyer. It’s non-negotiable in today’s market.
When you meet with your lender, they will assess your financial situation by calculating your income, monthly debts, and any savings you have for things like the down payment, closing costs, and post-closing reserves. They’ll also estimate your property taxes and homeowners insurance, and they’ll pull your credit report to evaluate your credit score. This is a thorough process designed to ensure you have a clear understanding of your financial situation before moving forward.
“A smooth process will save you time and avoid unnecessary stress down the line.”
One misconception many buyers have is that they are locked into the first lender they speak with. In reality, you can shop around for the best deal at any point during your home search. The final decision on which lender to go with only happens when you sign the contract for your home, which is when you can lock in an interest rate for 30, 60, or even 90 days. Don’t feel pressured to commit right away and take your time to find the best lender for your needs.
Another common worry for buyers is the effect of multiple credit inquiries. It’s understandable to be concerned about how each inquiry might affect your credit score, but there’s good news. Credit agencies know that home buyers typically shop around for the best mortgage rates, so multiple credit pulls within a short window of time are generally counted as one inquiry. The impact on your credit score is minimal, if any, so don’t hesitate to explore your options.
While interest rates are important, they are not the only factor to consider when choosing a lender. It’s equally important to select a lender who is efficient in processing and underwriting your loan so your transaction moves smoothly. A smooth process will save you time and avoid unnecessary stress down the line.
If you’re ready to get pre-approved, start the search for the right lender, or if you simply have questions about buying a home, don’t hesitate to reach out. Contact me at (914) 548-6179 or email ted.holmes@raveis.com. Let’s navigate the home-buying process together!
