Pre-Approval in 2023: What You Need To Know When Buying On Martha's Vineyard
If you are not planning to pay cash for a home or land purchase on Martha's Vineyard, one of the first steps in your homebuying journey is getting pre-approved. Many buyers we work with know they will be approved and know how much they're hoping to spend, so don't bother to get a pre-approval letter from their bank. In the past, many sellers trusted that buyers on Martha's Vineyard, who were making a second home purchase, would have no issues getting approved for a loan. Therefore, it was not customary to require a letter from the lender. Today, things have shifted and anyone wishing to submit an offer on Martha's Vineyard and have a seller seriously consider it, needs to have a pre-approval letter, or at the very least, a pre-qualification letter. Learn the difference here.
“In a preapproval [sic], the lender tells you which types of loans you may be eligible to take out, how much you may be approved to borrow, and what your rate could be.”
Basically, pre-approval gives you critical information about the homebuying process that’ll help you understand your options and what you may be able to borrow.
How does it work? As part of the pre-approval process, a lender will look at your finances to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter to help you understand how much money you can borrow. That can make it easier when you set out to search for homes because you’ll know your overall numbers. And with changing mortgage rates impacting affordability for many buyers today, a solid understanding of your numbers is even more important.
Pre-Approval Helps Show You’re a Serious and Solid Buyer
Another added benefit is pre-approval can help a seller feel more confident in your offer because it shows you’re serious about buying their house. A recent article from Forbes notes:
“From the seller’s perspective, a preapproval [sic] letter from a reputable local lender often can make the difference between accepting and rejecting an offer.”
This goes to show, even though you may not face the intense bidding wars you saw if you tried to buy during the pandemic, pre-approval is still an important part of making a strong offer. In fact, Christy Bieber, Personal Finance Writer at The Motley Fool explains it may be the most important part of making an offer:
“Pre-approval maximizes the chances you’ll be able to actually close the deal – and sellers want to see that.
The fact that a pre-approval gives you a better chance of getting your offer accepted is undoubtedly the most important reason to complete this step . . .”
Additionally, if you are only planning on financing a small portion of the purchase, a letter reflecting this helps to remind the seller that your offer is much stronger than another that is only putting 10-20% down and financing the rest.
With very low inventory and continuous demand for properties on the Island, we expect multiple offers for most properties that come on the market. Getting pre-approved for a purchase on Martha's Vineyard is an important first step towards buying a home. It lets you know what you can borrow and shows sellers you’re serious about purchasing their home. Connect with a member of our team and a trusted lender so you have the tools you need to purchase an Island home in today’s market.