Many homebuyers have learned the hard way that getting a pre-approval for a home loan is very important. Finding a perfect home is rare and if financing falls through then that dream home can be lost from you forever. It can also be a reason why someone else, that makes an offer, gets the home you wanted if they are already approved for financing, but you are not.
Getting pre-approved before you start looking can save heartache and drama. Many Realtors have begun asking prospective clients if they are already approved for financing during their first meetings. Having that pre-approval letter in hand will make you feel more confident and truly allows you to know how much house you can buy and types of financing available to you.
Having a Pre-Approval Letter Let’s Sellers and Realtors Know You Can Buy
Nothing is more frustrating for both the Realtor and the seller than having an offer come in, only to find out that the buyer doesn’t qualify for financing. The time taken by a Realtor to show homes, contact the seller and bring everything together is wasted when a loan can’t be secured. Just imagine trying to sell your home, and when you think the house has sold, it falls through and you have to start waiting for a buyer all over again. As a buyer, it’s a matter of respect for the seller and your realtor to walk in with pre-approval so that both know they aren’t losing time.
Negotiations are Easier
If a seller knows that they have a for sure sale, so long as the buyer can be made happy with the terms, then they are more likely to negotiate those terms. With a pre-approval it’s easier to ask the seller to bring the price down, or to include other incentives such as appliances or repair funds for minor issues. The seller knows that they money is there, and it’s just a matter of finalizing terms for deal to be completed.
Home Searching is Better Defined
With pre-approval it makes it easier to define the limits of what you can look for on the market. Having that defined loan amount for what is affordable and for your comfort zone tells you exactly how much house can be purchased. Many people are just guessing, or may be using a mortgage calculator, which means they may be missing out on how much they can actually afford. If you can afford a better house than you expect, then you may be missing out on an investment opportunity, or missing out on other amenities that may have made the house work better for you.
It can also make sure that you’re not looking at homes that are too high and outside of what can be purchased. Time is valuable, and unless you’re window shopping for fun, then losing time looking at homes that are too expensive can be costly when it comes to time. Not only does it eat time, but it can also be dejecting to discover you can’t afford a home that you have your heart set on. If you know you can’t qualify for higher financing for those more expensive homes, then it will keep you from becoming invested in a property you can’t currently afford.
Don’t Confuse Pre-Approval with Pre-qualification
One thing to be aware of is that there is a difference between what banks call pre-approved and pre-qualified. Pre-approval means that the financing has been approved up to a certain amount, and you just need to find a home that meets the lenders requirements and price. Pre-qualification is a lender’s way of saying they believe you can get approved for a certain price, but it hasn’t been to an underwriter to actually authorize the loan. Pre-qualification means that based on preliminary information that you qualify for a loan, but the details of the loan have not been determined. At the end of the process, a pre-qualification may mean that you won’t actually be approved for financing.
Pre-Approval Decreases Stress
One of the best aspects of pre-approval is the way that it reduces much of the stress of searching for a home. The guesswork is taken out of the process, allowing you to be sure that when the time is right, and the right home comes along, that there won’t be any surprises that stop the sale from going through. It will likely take less time to find a home that you want, realtors may give better service and it’s unlikely that you’ll be turned down if you make an offer on a home.
No matter how you look at it, getting pre-approved before starting to look at homes is the best option available. The peace of mind, the confidence it gives, the leverage for negotiation and the clear parameters for searching are all very comforting. If you’re going to jump into the home buying market, then the importance of being pre-approved can’t be ignored.
My team and I here at Union Home Mortgage spend so much more time with our clients during the upfront process than others. We want to make sure that no surprises come up during the transaction and that you know everything that is going on and will be going on during the loan process. We pride ourselves on over communication and holding your hand and creating Raving Fan clients for Life! For more information on pre-approval and pre-qualification, contact Union Home Mortgage today!