Get Preapproved for a Mortgage — Especially if You Live in These Cities

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It’s crushing when your offer on the house of your dreams is rejected. Perhaps you were outbid, but it’s also possible that you were competing against buyers who got preapproved for a mortgage, and you didn’t.

That’s why getting preapproval is crucial no matter where you live — you don’t know whom you’re competing with and what you’re up against. If you’re house-hunting in a hyper-competitive market where real estate inventory moves fast, getting preapproved is especially important to boost your chances of having a winning bid.

So where are some of the fastest-moving real estate markets? NerdWallet analyzed data from real estate website Zillow to see how long properties in 175 cities were listed for sale and the median age of inventory to find the markets with the fastest-selling homes. Then, we ranked cities based on the average of those data points.

What is mortgage preapproval?

Homebuyers have the option to seek prequalification or preapproval by a mortgage lender. Prequalification is a quick screening — the lender asks you for basic information, such as your income, assets, debt and possibly your credit history, then provides an estimate of how much house you can afford.

For preapproval, lenders review your credit score and verify your financial history to create a more detailed analysis of how much you could borrow. While preapproval doesn’t guarantee a mortgage, it’s an important step.

Why get preapproved?

If you and another buyer submit the same offer, sellers may be more likely to go with the preapproved buyer.

“It shows the seller that you are a serious buyer and that you have the ability to buy,” says Patrick Wallace, CEO and association executive of California’s Central Valley Association of Realtors. Preapproval matters even more in hot markets, where you can get an edge over buyers who didn’t take that extra step, he says.

Getting preapproved as soon as you start the homebuying process is invaluable, Justin Fichelson, star of Bravo’s “Million Dollar Listing San Francisco,” told NerdWallet.

“I’ve seen many instances where people are not preapproved and they find a house they like, and they miss out on the property, because the approval process does take a couple days,” he says.

Where preapproval has the most impact

Preapproval can be especially important for homebuyers in cities where houses sell quickly because a fast-moving market is often a sign of high demand for a smaller supply of housing. Surprisingly, this can be true even in places where the economy is struggling, such as Stockton, California. Although Stockton is still battling a sluggish economy, our analysis found that homes in this city sell quickly — it’s the eleventh-fastest-selling housing market nationwide and the fourth-fastest in California.

How is this possible? Wallace says communities in California’s Central Valley, including Stockton, were hit hard by the mortgage meltdown and bank foreclosures in the Great Recession. Investors swooped in and bought many of the foreclosed properties, and continue to hold onto them, Wallace says. Additionally, new development is limited. With a restricted supply, when a home goes up for sale in Stockton, it’s snatched off the market quickly. Preapproval can be important in low-inventory markets, even if the local economy isn’t stellar.

If you’re looking for a home in any of cities in the table below, you could have a competitive edge by getting preapproved by a lender before you make an offer.

Top 10 U.S. cities where preapproval may matter most

Rank City Days a house is listed on Zillow Age of housing inventory (in days) Score
1 San Jose, CA 43.9 29.9 36.9
2 San Francisco, CA 46.3 29.4 37.9
3 Denver, CO 55.9 45.8 50.9
4 Greeley, CO 59.8 47.8 53.8
5 Dallas-Fort Worth, TX 57.1 51.2 54.2
6 Seattle, WA 60.6 49.3 55
7 Boulder, CO 59.4 53.3 56.4
8 Santa Cruz, CA 65.2 48.7 57
9 Austin, TX 64.6 53.7 59.2
10 Portland, OR 64.7 53.7 59.2

The states with the most cities in the list of 175 fastest-selling U.S. markets are California, Florida, North Carolina, Michigan, Texas and Tennessee. Here are the top five cities in each of those states.

California cities where preapproval may matter most

Rank in California City Days a house is listed on Zillow Age of housing inventory (in days) Score
1 San Jose 43.9 29.9 36.9
2 San Francisco 43.3 29.4 37.9
3 Santa Cruz 65.2 48.7 57
4 Stockton 76.3 45.8 61.1
5 Sacramento 70.7 52.4 61.6

Florida cities where preapproval may matter most

Rank in Florida City Days a house is listed on Zillow Age of housing inventory (in days) Score
1 Tampa 94.6 67.7 81.2
2 North Port-Sarasota-Bradenton 93 69.7 81.3
3 Port St. Lucie 97.3 65.8 81.6
4 Orlando 97.8 67.5 82.7
5 Miami-Fort Lauderdale 105 62.7 83.9

North Carolina cities where preapproval may matter most

Rank in North Carolina City Days a house is listed on Zillow Age of housing inventory (in days) Score
1 Raleigh 76.9 62.2 69.5
2 Durham 89.9 72.5 81.2
3 Charlotte 95.7 70.8 83.3
4 Wilmington 119.6 83.3 101.4
5 Burlington 122.3 85.6 103.9

Michigan cities where preapproval may matter most

Rank in Michigan City Days a house is listed on Zillow Age of housing inventory (in days) Score
1 Grand Rapids 86 65 75.5
2 Ann Arbor 94.8 67.3 81.1
3 Detroit 101.4 64.9 83.2
4 Lansing 114.6 82 98.3
5 Monroe 104.3 95.9 100.1

Tennessee cities where preapproval may matter most

Rank in Tennessee City Days a house is listed on Zillow Age of housing inventory (in days) Score
1 Nashville 81.4 56.6 69
2 Memphis 97.4 69.6 83.5
3 Clarksville 112.8 79.4 96.1
4 Chattanooga 109.3 91.8 100.6
5 Cleveland 116.6 87 101.8

Texas cities where preapproval may matter most

Rank in Texas City Days a house is listed on Zillow Age of housing inventory (in days) Score
1 Dallas-Fort Worth 57.1 51.2 54.2
2 Austin 64.6 53.7 59.2
3 Houston 75.9 63.5 69.7
4 San Antonio 81.4 62.4 71.9
5 Killeen 102.6 69.4 86

What’s involved in the preapproval process

For preapproval, a lender takes a close look at your financial situation to determine your eligibility for a mortgage. In addition to pulling your credit report, a lender will likely expect you to provide the following information:

  • Social Security number and marital status.
  • Recent bank account and investment account statements.
  • Residential history, including landlord contact information if you’re a renter.
  • Total monthly expenses, including regular bills.
  • Assets (like stocks and retirement accounts) and liabilities (like student loans or credit card debt).
  • Employment information, including recent pay stubs and W-2 income tax forms.
  • Profit and loss statements if self-employed.
  • Real estate holdings.
  • Gift letters if a relative’s gift is helping cover your down payment.

Methodology

NerdWallet analyzed Zillow data to see how long properties in 175 cities were listed for sale and the age of inventory to find the markets with the fastest-selling homes. We ranked the cities based on a score that averaged those two data points.

  1. Median days a house is listed on Zillow is the median number of days that sold homes were on the market in a given month, including foreclosure resales, for each month in 2015. This was calculated as an annual average.
  2. Age of inventory from Zillow is the median number of days all active listings have been current, calculated weekly, for each month in 2015. This was calculated as the annual average.

Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email:emily.crone@nerdwallet.com. Twitter: @emstarbuck.
This article originally appeared on NerdWallet.