Updated June 3, 2021 . AmFam Team
Before diving into the home buying market, well-informed shoppers already have an idea of how much home they can afford. Both mortgage preapproval and prequalification will give you an estimate, but only one may help you unlock the door to your new home. Here’s what you need to know about both, so you can confidently take the next, exciting steps toward home ownership.
When you shop for a house, you’ll want to get a feel for the market. One of the ways the real estate industry captures that in the housing market is by describing buyer and seller markets by temperature. Housing markets can run hot and cool depending on several factors.
If the housing market is “cool” that usually means the landscape is favored toward the buyer. It suggests there are more homes to sell than interested buyers.
A “hot” housing market, on the other hand, is the opposite; it’s a market with many interested buyers looking at a small concentration of available homes.
When the market is hot, knowing the difference between preapproval and prequalification could help you stand out and increase the chances of a seller accepting your offer. Having a preapproval letter in hand and a lender lined up in a hot market shows the seller that you’re past the starting line and already in the race. The home seller now knows you’re approved for that amount and the sale will likely go through.
With a buyer who doesn’t have preapproval, it’s not clear that a lender will back their mortgage and the sale could fall through.
One final thing to remember is lenders often require that you get homeowners insurance before closing on your home. And that’s where we can help! Talk to your American Family agent (Opens in a new tab) for easy, affordable coverage that’s right for you.