Why should I consider getting pre-approved before buying a home?

Years ago, buyers didn’t worry about financing their home purchase until after they found the home they wanted to buy.  Once they had an accepted offer, they’d shop around for a week or so and then submit a loan application.

The recent low inventory of homes for sale (in general) has made home buying highly competitive in some areas.  To compete, many buyers are now getting pre-approved for a mortgage.  This way, the buyer is seen as more stable, has greater influence in negotiating a purchase price, and can act quickly when they find a home the really love.  A pre-approved homebuyer is considered almost as strong as a cash buyer. 

There are two parts to mortgage approval:  1) approval of the borrower, and 2) approval of the property.  Mortgage pre-approval is a process whereby the borrower is approved for a specific mortgage amount.  The approval is usually good for a period of time.  A property approval is one with satisfactory appraisal and a clear title report.  Final mortgage approval also requires a purchase agreement that is signed by the buyer and the seller.

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