Buying a house in 2020 has been full of uncertainty and turbulence due to the far-reaching economic implications of the COVID-19 outbreak.
In April 2020, it was reported that many buyers decided to stay renting and temporarily put off their property searches. Many sellers also took their houses off the market, tightening the already small housing inventory.
Despite the low interest rates designed to render mortgage loans and other hot real estate markets extra attractive and encourage consumption, many financial institutions stopped lending at some point.
Some mortgage lenders have raised their credit requirements and down payment minimums caused by the fear of borrowers with weaker repayment capacity.
The rules of homeownership and mortgage application have changed during the pandemic, except for one thing: the importance of pre-approval.
Nothing will inhibit you from shopping around for houses and home loans without getting pre-approved first. But it would be unwise to skip this vital step in the process. Here, understand the advantages of seeking a pre-approval offer from a lender in the time of coronavirus.
1. It Tells You How Much House You Can Afford
Unlike getting pre-qualified, getting pre-approved is an expression of a financial institution’s commitment to lend you an exact amount of money and to offer you a special interest rate under certain conditions.
Pre-qualification is nothing but an indication (not a guarantee) that you could be creditworthy enough to take out a home loan and obtain an estimated amount of cash when you apply.
In other words, pre-approval allows you to know the highest amount a particular bank is willing to loan you. This information gives you a reality check, keeping you from overvaluing your ability to repay a massive debt like a mortgage in the long run.
2. It Lets You Take a Closer Look at the Right Houses
Once you know your budget ceiling based on your credentials at the time of pre-approval, you could save time by focusing only on the properties within your price range. With less distraction, you could assess each listing that qualifies and make a better purchase decision.
3. It Adds Legitimacy to Your Offer
The pandemic might have disrupted property sales. But house purchases bounced back in different places, like Utah, in June 2020.
Discerning mortgage borrowers are taking advantage of the low interest rates to snag affordable deals and wind up a winner during this crisis.
When you shop around, expect to face some fierce competition. If you get pre-approved before talking to sellers, you could set yourself apart from buyers who are still unsure whether they could afford the offers they’re giving.
As a pre-approved buyer, you could use your guaranteed purchasing power to gain more leverage during negotiation.
4. It Helps Speed Up Loan Approval
Successful pre-approval means speedy processing procedures. After all, you already have your lender’s word, so expect to face less scrutiny, provided that you meet the conditions set forth by the financial institution.
A mortgage pre-approval before the pandemic started; it’s even more critical now. As one of the things you could secure to inspire optimism, confidence, and trust in sellers and lenders alike, it would be remiss of you if you ignore its merits.