Why you should get pre-approved when shopping for your first home
Written by: Aimee June | Assistant Branch Manager | Chatham Branch
Unless you have been hibernating all winter long, you’ve likely seen how hectic the real estate market has been already! The additional stress this is putting on home buyers has increased substantially but it is a particularly difficult situation for first time home buyers.
Competitive multiple offers (often with no conditions attached), restricted showings, rising prices, lack of inventory and COVID-19 restrictions have all made buying a home even more challenging. So, what is one thing you can do to make things easier and a little less stressful?
Get a pre-approval from your financial institution before you start house hunting.
Having a pre-approval in place does several things for a home buyer, especially a first-time home buyer:
1. It shows that you are a serious buyer
In this extremely competitive environment, having a pre-approval shows realtors and sellers that you are a serious buyer. Sellers are often reviewing multiple offers. While you may require an appraisal, or approval from Canada Mortgage and Housing Corporation (if you do not have 20% down), if you can show that you have a pre-approval in place for the mortgage from your Financial Institution the seller will likely be more apt to accept an offer they know is likely to stand. In today’s market, realtors prefer buyers to come to the market knowing they are pre-approved.
2. Eliminates possible disappointment
Getting pre-approved can eliminate possible disappointment. You don’t want to start house hunting, fall in love with a home, make an offer, only to find out you have been declined for the mortgage. Getting pre-approved will also correct any potential credit problems that may be hiding. First time home buyers often are not in-tune with their credit scores. They perhaps have not yet built a credit score or have a surprise late payment or collection item on their credit report they were not aware of. Starting the pre-approval process ahead of time will give you a chance to correct this before the house hunting gets serious.
3. See the true costs of buying a home
A pre-approval will help you to understand all the true costs of buying a home and home ownership before you make the commitment. It is great if you have a down-payment saved, but what about closing costs? Utility set-ups? Moving costs? Repairs that may need to be done? A financial advisor will be able to help you work through all these numbers and ensure that you have enough set aside for additional, sometimes unexpected, costs.
4. Plan your home payment
This is a great opportunity to discuss your budget and decide what type of mortgage payment is affordable for you when you consider additional monthly bills like property taxes, utility bills, and maintenance, with your financial advisor.
5. A pre-approval will guide you to your optimal purchase price.
The last thing you want is to be house poor. Buying a home, especially if you are a first-time home buyer can be complicated, especially in today’s market. Buying a home should be an exciting and joyous time in your life. Sitting down with a qualified financial advisor to review your personal situation and becoming pre-approved will help take some of the stress out of your buying journey.
If you are thinking of buying a home, connect with a Mainstreet Financial Advisor to start the conversation, you will be glad you did. Book a meeting today.