IMPORTANCE OF GETTING PRE-APPROVED BEFORE LOOKING AT HOMES
There is an important first-step you should take before shopping for a new home. This will save you a bunch of time, hassle and frustration, and will make shopping for your new home a fun experience! This important step is getting pre-approved for financing. Here are the reasons why you need to do this:
- You’ll know what payment you can afford and what your maximum purchase price can be. Why waste time looking at $200k homes when you’re only approved for $150k?
- You will be aware of whether or not you can qualify to purchase right now or if you need to take some additional steps to clear up some credit issues before you can purchase.
- Now you are pre-approved! You can now make an offer on a home! In today’s market, there is a lot of inventory for sale, but the good inventory sells fast. Here are three very common scenarios you will run into when making an offer on a home you like:
- It is not uncommon to run into a multiple offer situation on a home. This means that if you make an offer, there is a good chance someone else is making an offer as well. An offer that is submitted to a seller along with a pre-approval letter will be taken much more seriously than an offer from a buyer who has not taken this important step.
- Timing is important. Let’s say you find a home you like and are excited about making an offer. At that time, if you have to spend an extra day or two chasing down financing before you can make the offer, you’re running the risk that another buyer will come along and purchase the home instead of you.
- Don’t miss the chance to buy your dream home! You may be able to avoid a multiple offer situation by being ahead of the game. A day or two makes a big difference. Buyers are out looking at homes all the time. If you are prepared and ahead of the game, you may seal the deal before another buyer even has the chance to get their offer submitted.
Why is getting pre-approved important to Realtors? Why should you provide a pre-approval letter to your Realtor?
Your Realtor needs to know that you are qualified to purchase a home and what price you can afford. Keep in mind that your Realtor works for free and only gets paid if a home sale closes. You are probably going to want to see several homes before making your decision. This means that for weeks (possibly months) your Realtor is helping you research homes. He or she is contacting each listing agent for information, availablility and showing information. Your Realtor will also map out each property and coordinate showing times. They will also use their time, expertise, gas, mileage, and supplies to show you these homes. Time will also be spent negotiating your offer and working with you on financing, inspections, the closing and more. All of this is done with the assumption that you are able to buy.
WHAT IS THE DIFFERENCE BETWEEN PRE-QUALIFICATION AND PRE-APPROVAL?
Please note the difference between a pre-qualification letter and a pre-approval letter.
Prequalification is an unofficial estimate of how much house you can afford. A loan officer will make an educated guess about your ability to buy a home based on your verbal or written submissions of income, finances, and credit history. Lenders may or may not pull your credit report during this evaluation.
Pre-approval carries a lot of weight in the mortgage and real estate industry. In order to be pre-approved for a loan, you provide your mortgage lender with documentation such as tax returns, bank statements, pay stubs and more. Your lender will analyze these and will also verify employment and pull your credit report. A pre-approval letter will also specify the interest rate you will pay.
Sellers love buyers who are pre-approved because they have proof that the buyers have financial backing and are prepared to pay the required amount. Most sellers won’t even consider an offer from a buyer who’s offer is not accompanied by a pre-approval letter.
Contact me today and I will be happy to provide you with a good mortgage reference. Someone who will walk you through the process and help guide you to the right loan program for your needs.