There are multiple parts to the home shopping process. There are logistics to consider, and timing is a factor as well. It’s important to have a strategy in place and to be efficient with every step.
This is all especially important when competing with other buyers to get a specific property.
This brings us to the subject of mortgage pre-approval, how it relates to the home search process, and why it helps buyers with their shopping. In addition, we’re going to explain why it’s one of the most critical pieces of the home buying puzzle, and how it will shape your strategy as you go along.
We spoke with George Dmitrovic from WRX Property Group to get a better idea of what happens when you go out to shop for homes, and how that ties in with your mortgage situation.
Being Pre-Approved for a Mortgage is The Starting Point for Home Shopping.
A mortgage pre-approval is a certificate specifying what mortgage amount you may qualify for, along with the interest rate that applies to it. It’s typically valid for up to 120 days. You can get pre-approved by talking briefly to a mortgage professional and having them assess your financial situation.
Getting pre-approved for a mortgage achieves two important things:
1. It helps you to understand what your budget is and how much you can afford
2. It helps secure funds for your home purchase, and eliminates some of the logistics and
running around that you would be dealing with otherwise.
Understanding your budget and what you can afford is always the starting point to shopping for a home.
For example, you wouldn’t go shopping at the grocery store without knowing how much you have in your wallet, or even checking to see that you have your wallet with you, would you? The same applies here.
Knowing your budgetary constraints helps determine your approach so that you know what to aim for. This will also help you filter out homes that are not real prospects. Let’s discuss why and how.
Choosing a Home
One important note to always keep in mind is that there’s no such thing as a ‘perfect home’. All homes are unique, each with its own pros, cons, quirks, and charms. When choosing a home, you’ll have to know:
- What you’re looking for in a home you want (ie. location, size, appearance, and other
particulars) - What is absolutely essential to you (ie. not too many stairs, a large backyard, privacy from
neighbours, quiet) - What would you be willing to compromise on
- How everything mentioned here fits into your overall budget
To be blunt, if you don’t have a clear grasp on the above points, you won’t really know what you’re looking for, and therefore you won’t be shopping effectively. Here, we can start to understand how being aware of your budget will play important role in the properties you aim for.
Logistics of Home Shopping
There are multiple stages to buying a home. You have, in chronological order:
1. Considering your needs and what you want to get
2. Securing a pre-approval for the mortgage so that you can establish a budget
3. Looking for homes. Typically, this happens online either through a home search portal, or through listings that your agent sends you by email (through an automated listing notification system)
4. Going out to view homes in person
5. Going through the offer process on a home you like
6. Offer Acceptance
7. Fulfilling any conditions if applicable (home inspection, condo status certificate, etc)
8. Last walkthrough and getting ready to move
9. Closing day, making the payment, legal transfer of ownership, getting the keys and moving in
It’s no coincidence that the mortgage pre-approval is close to the beginning of the list, and it’s no coincidence that it needs to be done ahead of everything else. This is because it heavily influences everything that follows, from viewing homes to putting in the offer. Not sorting it out early on can cause complications later down the line.
For example:
- You might not be looking at homes that are right for you
- You may not know what to put in for your offer (and may have to use a mortgage condition, which is not ideal)
- Your logistics might get needlessly complicated, causing additional headache
- Your timeline may be delayed, which again can cause unnecessary headache
The Importance of Timeliness
Timeliness is a big factor in real estate and in shopping for homes. Homes don’t stay on the market forever, and some actually come and go quite fast.
The home that is ideal for you will only be on the market for a fixed amount of time. When the time comes, buying a property is on a first come first serve basis (and the early bird gets the worm).
Even more so, being quick to act can help you beat out the competition if you can get to a promising property first. All this points to how important it is to be effective with your time, and one of the key factors here is to have the logistics sorted out and not have anything delay or derail your efforts.
Mortgage pre-approval, once again, cuts out a lot of that headache, and sets you up on solid
footing.
The Competitiveness of Your Offer
Aside from timing and logistics, pre-approval impacts how competitive your offer is. Putting in an offer on a home is serious business. Once you send in an offer, if the seller accepts, you are legally obligated to purchase the home for that price, and there is no backing out without serious legal consequences.
This means that you need to know fairly certain how much you can afford. If you don’t, and you want to put in an offer, you have the possibility to put in a mortgage condition. The offer would then be conditional on the buyer (you) successfully getting a mortgage.
However, conditional offers are risky for the seller because they’re not set in stone. As a consequence, sellers don’t find these offers to be too appealing and may reject them if they have other offers without conditions available.
In a competitive situation, where more than one buyer is trying to get the same home, a seller will almost always prefer an offer that is certain versus one that is a maybe. This can be the case even if the “maybe” is a higher bid than other offers. It’s still only a “maybe” at the end of
the day. This can easily be avoided by arranging pre-approval before shopping, which will solidify your competitive edge when putting in an offer to buy a home.
Wrapping Up
We hope you found this guide to be helpful, and that you now have a clearer picture of just how important it is to get pre-approved beforehand. The good news is, mortgage pre-approval is not a difficult thing to sort out, and, once it is done, you are free to move forward with your home shopping with confidence.