As mortgage rates finally began to drop toward the end of 2024, the real estate market became significantly more competitive, and there are no signs of it slowing down in 2025.
In this market, prospective buyers must move quickly for their offer to be considered—and there are steps they can take ahead of time to increase their chances of securing an accepted bid.
“My real estate agent set me up for success by ensuring I got a fully underwritten pre-approval before I even started looking at houses,” says Brian Davis of Springfield, MO. “I had all my bank records and pay stubs in order. I made sure my credit was good beforehand. I was always five steps ahead to ensure I was ready. When the right house finally came along, my bid got accepted.”
Here’s how you can ensure you’re prepared as well, beyond just getting pre-approved.
What does it mean to be “pre-approved”?
There is a big difference between being pre-approved and pre-qualified for a loan.
“Pre-qualification is kind of informal, where you tell the lender some basic information about your finances, but they don’t check the information thoroughly or run a full credit inquiry,” says Leon Turkin, a mortgage broker at Turkin Mortgage. “It’s much more an informal estimate of how much they think you could borrow rather than a guarantee.”
If a buyer is only pre-qualified, they’re not truly prepared to bid, but “it could help them connect with a real estate agent who guides them toward full pre-approval,” according to Andrew Fortune, real estate agent and brokerage owner at Great Colorado Homes.
There are two types of pre-approvals: a basic pre-approval and a fully underwritten pre-approval.
“A basic pre-approval means the lender has run credit, and the loan officer has reviewed all documents,” says Jennifer Beeston, SVP of Mortgage Lending at Guaranteed Rate Mortgage. “A fully underwritten pre-approval means that the lender has run credit, and the underwriter has reviewed and approved the loan contingent on the buyer finding a home.”
A fully underwritten pre-approval is the strongest pre-approval available.
“That’s what every buyer should request of their mortgage lender to write the strongest offer and have the best home-buying experience,” advises Beeston.
Documents you need to be pre-approved
In order to be pre-approved, according to Beeston, you need to provide proof of identity, as well as employment documents such as tax returns, W-2s, and paystubs.
You also need to provide bank statements, evidence of other income, investment or retirement account statements, and loan statements.
“Depending on your unique scenario, the lender may also request additional documents,” says Beeston.
You’ll have to undergo a credit check to be pre-approved as well.
Win your bid in 2025 by proving your ability to get financing up front
With mortgage rates dropping last week to their lowest level since December 2024, “homes continue to sell quickly due to high demand in the Bay Area,” says Alexander Kalla, a real estate agent for Keller Williams in San Jose, CA. “Sellers often prioritize buyers who can close fast.”
Having a fully underwritten pre-approval can accelerate the process and make your offer more attractive.
“We have had so many clients beat out other offers because they have fully underwritten pre-approvals,” says Beeston. “Taking the time to do the work of a fully underwritten pre-approval shows that you are a serious buyer, and it also is less risk for the seller as they know you are fully vetted.”
Additionally, readily available proof of earnest money and proof of down payment can also reassure sellers of your commitment, according to Kalla. “It will also help with negotiations,” he adds.
Also, hire your real estate agent.
In any real estate deal, it’s crucial to have an experienced agent who represents you exclusively.
“Having your agent ensures someone advocates solely for your interests during negotiations and is a fiduciary dedicated to ensuring your best interests,” says Kalla.
Dual agents represent both the buyer and seller, but “the agent has a fiduciary duty to the seller to get the highest price and best terms for the seller,” says Seb Frey, broker associate for Compass in Silicon Valley, CA.
That’s why having the seller’s agent represent you is always harmful to the buyer in every situation.
Finally, agree to minimum contingencies.
Another way to improve your chances of winning a house bid is to agree to minimum contingencies. Doing so shows an eagerness to close a deal quickly.
While accepting minimal contingencies can make your offer more appealing, it also carries significant risk as it involves betting on the unknown.
“You should never waive a home inspection contingency, as you never know what that is going to reveal, and there are often issues you can’t determine simply by walking through a home—such as the condition of the roof; termites; whether mold might be present; and the age/condition of plumbing, heating, cooling, and electrical systems,” says Cara Ameer, a real estate agent with Coldwell Banker who operates in both California and Florida.
Insurance contingencies—the requirement that a homebuyer apply for and obtain homeowner’s insurance before the sale is completed—are also risky to skip.
“I would not recommend waiving an insurance contingency in today’s climate, as trying to obtain insurance can be quite costly and difficult,” says Ameer.
However, there are some other contingencies that can be bypassed to speed up the process and win you the house.
“In my market in the Silicon Valley, it is extremely common for buyers to waive the appraisal contingency when making a purchase offer—even if they are getting a loan and need an appraisal,” says Frey. “Their deep cash reserves mean that they have no concerns about a low appraisal because they will be able to put more down to make sure that they meet the debt-to-equity ratio that their loan requires—which is typically 80/20.”
A financing contingency—which allows the buyer to back out if they can’t secure a loan—could also be waived, according to Ameer, especially “if the buyer is confident in their ability to buy and has the funds to do so.”
This post was originally published on www.realtor.com
