A recent housing report showed that most first-time home buyers in Washington State and nationwide shop for a mortgage loan before shopping for a home. There are several advantages to taking this preliminary step prior to house hunting.
First-Time Buyers Shop for Financing First, and Homes Second
On October 31, the Washington Post reported the results of a survey that showed “74 percent of buyers looked into their home financing options before shopping and, among first-time buyers, that number jumps to 85 percent.”
According to the report and survey, most buyers view mortgage pre-approval as a worthwhile step. They also feel that it makes sense to do it before finding a real estate agent or house hunting. Pre-approval also gives them more confidence regarding their purchase, and a better understanding of what they can afford to buy.
This is something we’ve blogged about in the past. In a typical real estate scenario where a mortgage loan is being used, it makes sense for home buyers to get pre-approved before house hunting.
The biggest benefits of pre-approval are:
- It enables you to whittle your house-hunting list down to a specific price range, which can be a huge time-saver.
- It helps you spot any obstacles to financing early on in the process, so you can address them before you move forward.
- It could also make the home seller more inclined to accept your offer. (See next section for more on this.)
Even More Important in a Competitive Real Estate Market
As the Post article rightly pointed out, getting pre-approved before house hunting is even more important in a competitive real estate market. And that describes most cities across Washington State, as of fall 2018.
To quote the story:
“a [mortgage loan] preapproval is essential in a competitive market where homes sell quickly and sellers have a choice of offers.”
Being pre-approved by a lender shows the seller that you are serious about buying their property, and that you have your financing line up. That’s a big deal in the eyes of a seller, and it could help your offer rise to the top.
The real estate market in Washington has cooled a bit over the past year or so. There’s more inventory coming onto the market, fewer bidding wars, and slower price growth compared to the last couple of years. But it’s not yet a buyer’s market, and it probably won’t be for some time yet.
In many cities across the state, the number of homes on the market (supply) still falls short of the number of buyers seeking them (demand). This makes things competitive for those who are trying to buy.
Given these conditions, it’s important for home buyers to utilize every advantage they can get in order to find and purchase a property. Mortgage pre-approval is one of several steps toward that goal. It helps set the stage for a more successful house hunting process.