During a busy real estate market, a pre-approval can give you a competitive advantage when making an offer on your first home.
It’s no surprise that the real estate and mortgage markets have changed drastically due to COVID-19. We are seeing new ways to meet with a broker, rule changes (check out a recent HalifaxToday article talking about changes to insured mortgage requirements), and the process going digital. One thing that has not changed is how important a pre-approval is when making an offer on a home. With a busy market, this can be the difference between buying a home this fall or missing out on that perfect home.
What is pre-approval?
A mortgage pre-approval is a formal offer from a lender that outlines the mortgage amount and rate that you can be approved for. This will give you a better understanding of your budget, the monthly mortgage payment, and an idea of the type of properties you can afford. This is the best place to start your homeownership journey.
During a pre-approval appointment, your unbiased mortgage professional will collect your documents, negotiate with lenders on your behalf, and find the right product to fit your situation. It is important to note that a pre-approval depends on your financial situation staying the same. If you take on new debt, lose your job, or have other significant changes to your situation, you may not be approved for the terms outlined in your pre-approval.
How does a pre-approval help me?
A pre-approval shows your real estate agent and a prospective seller that you are serious about your offer and you have financing arrangements in order. In a seller’s market, small competitive advantages help you gain the attention of a seller. Sellers know that homes are in high demand in Halifax, so they will usually err on the path of least resistance. Sellers prefer offers from buyers with fewer conditions, buyers that show their intentions with a large deposit, and buyers that have their financing in order, a pre-approval helps you stand out among other buyers.
Outside of making your offer more attractive to a buyer, a pre-approval gives you the maximum amount you will be approved for in your current financial situation. It’s always better to find out your budget before setting your sights on a property that is out of your price range.
Are pre-approvals guaranteed?
Like most things in life, pre-approvals are not guaranteed and they do expire.
If your financial situation changes from the time you receive your pre-approval to the time you submit your offer for approval, you may not qualify for the terms outlined in your pre-approval. If you want to know more about what you SHOULD NOT do after you are pre-approved, be sure to check out this blog post to learn more.
In addition to making sure your financial situation doesn’t change, you also need to make sure you don’t let your pre-approval expire. A pre-approval lasts for up to 120-days and will outline the amount you are approved for and will allow you to lock in a rate for the pre-approval period. This is helpful during times of uncertainty where rates change frequently. If rates rise, you have already locked in a rate that will benefit you. If rates decrease, you will be able to get the lower posted rate, given your financial situation has not changed.
Where do I start?
Before you start your house hunt, you should make an appointment with an unbiased mortgage professional to review your situation and lock in a pre-approval. A pre-approval will help make you a more attractive buyer and give you a competitive edge in a busy real estate market. With rates at an all-time low, it’s a great opportunity to lock in a pre-approval and know what you can afford. An unbiased mortgage professional will help you understand your options, and make sure you understand what you can afford in advance of making an offer on your first home.
The fall market is shaping up to be a busy one. We are seeing all-time highs in the Halifax market, coinciding with all-time low mortgage interest rates. Getting started early will make sure that when you find that perfect home, you don’t miss out on the opportunity. In a busy market like Halifax, a pre-approval may be the difference between buying a home this fall and missing out on the house of your dreams.
For additional information, contact Clinton Wilkins Mortgage Team or call 902-482-2770.