If you’re planning to buy a Boston condo this year, one of the first steps in the buying process 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.
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.
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 Boston condo 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.
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.
Being intentional and competitive are musts when buying a Boston for sale this season. That’s why pre-approval is so important today. Pre-approval from a lender is the only way to know your true price range for a Boston condo and how much money you can borrow for your loan. Peter Warden, Editor of The Mortgage Reports, explains:
“The lender will check out your personal finances and issue you a letter confirming the amount you’re eligible to borrow. This not only gives you a firm budget for house hunting, but also lets sellers know you’re qualified to make an offer.”
Why does that matter so much today? There are many more Boston condominium buyers looking for homes today than there are homes available for sale, and that’s creating some serious competition. According to the National Association of Realtors (NAR), the average home is getting 4.8 offers per sale. As a result, bidding wars are still common.
Your pre-approval gives you a leg up in these situations. That’s because you know exactly what you’re approved to borrow before you write your offer, and it lets the Boston condo seller know you’re qualified to buy their home. This helps both you and the seller feel confident in what you’re bringing to the table. And that puts you in a better position to potentially win a bidding war.
As Warden puts it:
“There’s another important reason to get preapproved, too. And that’s because there are way more buyers than homes in today’s market — which means you need to be ultra-prepared if you want to win a bidding war. Most sellers are getting multiple offers right now. And most won’t even entertain an offer without a preapproval letter included.”
Every advantage you can gain as a buyer is crucial in a market that’s constantly changing. Mortgage rates are rising, home prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals, such as a loan officer and a trusted real estate advisor, on your side. They’ll help make sure you’re ready to put your best foot forward.
Getting pre-approved for a mortgage helps you better understand what you can afford and signals to sellers you’re serious about purchasing their home. Let’s connect so you have the tools you need to succeed as a homebuyer in today’s market.
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When the number of buyers in the Boston real estate market outnumbers the number of Boston condos for sale, it’s called a “seller’s market.” The advantage tips toward the seller as low inventory heats up the competition among those searching for a Midtown condo to call their own. This can create multiple offer scenarios and bidding wars, making it tough for buyers to purchase their dream homes – unless they stand out from the crowd.
Here are some reasons why pre-approval is so important and should be your first step in the homebuying process.
Why is having a pre-approval letter so important?
Low Beacon Hill condo for sale inventory, like we have today, means homebuyers need every advantage they can get to make a strong impression and close the deal. One of the best ways to get one step ahead of other buyers is to get pre-approved for a mortgage before you make an offer. For one, it shows the sellers you’re serious about buying a Beacon Hill home, which is always a plus in your corner.
Pre-approval can also speed up the Boston real estate for sale buying process, so you can move faster when you’re ready to make an offer. In a competitive arena like we have today, being ready to put your best foot forward when the time comes maybe the leg-up you need to cross the finish line first and land the home of your dreams.
Here’s the other thing: if you’re pre-approved, you also have a better sense of your budget, what you can afford, and ultimately how much you’re eligible to borrow for your mortgage. This way, you’re less apt to fall in love with a home that may be out of your reach.
Freddie Mac sets out the advantages of pre-approval in the My Home section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
Local Boston real estate brokers also have relationships with lenders who can help you through this process, so partnering with a trusted advisor will be key for that introduction. Once you select a lender, you’ll need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac also describes the ‘4 Cs’ that help determine the amount you’ll be qualified to borrow:
- Capacity: Your current and future ability to make your payments
- Capital or Cash Reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
While there are still many additional steps you’ll need to take in the homebuying process, it’s clear why pre-approval is always the best place to begin. It’s your chance to gain the competitive edge you may need if you’re serious about owning a home.
What do I need for a home loan application?
If you’re intending to purchase a property in 2021, it’s important to note what documentation you’ll need to provide to the lender in order to get loan approval.
Many prospective buyers cringe at the thought of pulling together reams of receipts, paystubs, and W-2s. But if you start doing that now, you’ll be ready to go in the event you stumble upon that perfect condo in South Beach.
Here’s the list of documentation you will generally need in order to verify a home loan application:
1. Two most recent paystubs
2. W-2s for the last two years
3. Two most recent statements for all checking, savings, CD, money market, and/or securities brokerage accounts
4. Most recent statement for all retirement accounts (IRAs, SEP-IRAs, 401ks)
5. Most recent statement of stock options, employee stock option purchase plans, etc. if part of the down payment or closing costs of a purchase
6. 1040s (federal tax returns, all pages) for the last two years
7. Mortgage, real estate tax, and insurance premium statements for all properties currently owned
8. Leases on all rental properties you may own
9. Divorce decree and settlement statement, if applicable
10. Name, address, and phone number for your landlord covering the past 24 months
11. Twelve most recent canceled rent payment checks or bank statements if your landlord is a private party
12. Copy of your state-issued driver’s license or passport and your date of birth
13. Copy of current mortgage statements on all outstanding mortgages.
Getting started with pre-approval is a great way to begin the home-buying journey. Let’s get together today to make sure you’re on the fastest path to homeownership.