Starting your home search before knowing what homes you qualify for can set you up for failure, disappointment, and wasted time. It’s important to know your finances first to make the home buying process smoother. More specifically, getting pre-qualified before you go out to look at homes is important for a few reasons:
1.) To make sure that you are looking at homes that you qualify for and can close on
When you begin a home search without a prequalified home loan, you operate on an assumption. The assumption is you believe you know what you can afford to spend on a property. Being prequalified helps you better understand the types of homes you can afford, and can help you to not waste time looking at homes that are out of your price range. With that information, you can shop smarter, as you'll give your realtors a budget to work with. Even before contacting a realtor, you can narrow down the specifics of your search and can better determine where you can afford to live and what kind of home features you can look for.
Being prequalified for a home loan prevents wasted time touring homes, neighborhoods and communities that are all wrong. A price range helps everyone narrow the search, especially with other groundwork prepared by the shopper. In the long term, after you've found a home, the prequalification could promote a shorter period for mortgage approval.
2. To make sure that you’re looking at homes you can qualify for that are within your budget
When you are prequalified and know a maximum amount, you can focus on property pricing as well as other costs associated with real estate transactions. Prequalification can help you plan ahead, better budgeting for everything from utilities to furniture.
Most importantly, being prequalified for a home loan eases all worries associated with financing and provides a sense of control when buying a home. Realtors and sellers will take you seriously, and are more likely to work harder with you to find your perfect home within your price range.
2.) To make sure you’re prepared to close the deal
Today’s low inventory in the housing market and fewer houses for sale means that there are multiple offers on every house. You have to have a pre-qualification in hand, know what your max price is and be prepared, or you could lose out on the home of your dreams!