Should homebuyers get approved for a mortgage before home shopping?
Do you typically encourage your homebuyers to get a mortgage approval before home shopping?
According to Carrie Niess, business analyst at American Financing, most homebuyers are doing it in reverse, finding their dream home and then hoping to get approved for a mortgage to afford that home. “The best thing to do is get an approval 30 to 60 days prior to shopping. That way any potential issues can be addressed before going under contract, you can determine an appropriate price range for your search, and you’ll have access to a pre-approval letter acknowledging what you’re financially approved for, so your offer can strongly compete against others,” said Niess.
Niess also said it’s imperative for homebuyers to have a “trustworthy” home inspector. “The cost of a detailed home inspection is easily justifiable when considering the cost of defective major structural or mechanical issues. A home is an asset. You should never intentionally owe more than it is worth. Even in aggressive home markets, buyers should not pay over the home’s appraised value. It’s not financially beneficial to be underwater on a home starting day one,” she added.
“We’re not seeing homes on the market for very long, no matter what market you live in. High buyer demand and low home inventory equates to higher pricing , which is great for the seller and economy, but can be discouraging for the buyer. First-time homebuyers can feel particularly overwhelmed having never been through the process before. The good news? Taking the time to get pre-approved with a mortgage lender before talking terms can make even the most inexperienced buyer more attractive to a seller looking to move.”
Niess said homebuyers should make an offer as soon as they find a home they like. She doesn’t believe mortgage rates will be moving too much in the near future.
Across Pennsylvania, millennials are buying, she said. Data from Ellie Mae’s Millennial Tracker shows the majority of young Pennsylvania homebuyers were single and 29, as of the first half of 2017. Most chose conventional loans over alternative products such as FHA loans to fund home purchases. On average, they spent $157,000 to get a home and waited 47 days to close the deal, she stated.