While many buyers are aware that a mortgage pre-approval letter increases their buying confidence and power, most may not understand exactly why pre-approval is so important. Why should you jump through the application hoops before even beginning your home search?
First, you'll know exactly how much loan you can afford, making your initial home search much easier. Why waste your time looking at homes either out of your reach or well below your financial grasp?
Second, pre-approved buyers stand on solid negotiating ground with sellers. Sellers working with well-qualified buyers are more likely to accept the offer and less likely to stall on terms and conditions.
Notice that the topic of this column is "pre-approval," and not "pre-qualification." What's the difference? Pre-qualification is easy - you provide basic information to a lender, and in a few short minutes, you have an answer. Pre-approval requires strict verification of documentation relating to your employment, credit history, sources of income, etc. It takes more time, but is more accurate and carries more weight.
Understand that pre-approval is not binding, and is still subject to a satisfactory appraisal on the prospective purchase. If your financial situation changes, interest rates rise or fall, or the deadline passes, a recalculation will be necessary; but a little legwork now will pay off handsomely as you approach the finish line on your contract.
Larry has over 15 years of experience in Bank Repos and Short Sales and non foreclosed real estate, my clients include General Electric Mortgage, Home Savings, Associates Finance, Transamerica. Current clients include Bank of America, Ocwen Financial Corporation, Countrywide and Keystone Asset Management to name a few. Larry is President of Weichman Associates located in Costa Mesa California. He has sold real estate since 1976 and is a 3rd generation Real Estate Broker. Larry has closed escrow on over 1,000 properties; from townhomes to commercial buildings. Please be sure to visit us on the Internet at www.TeamWeichman.com, www.OCHomeTracker.com or www.OCRepoBroker.com or you can call me at 714-241-4532
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Exactly right, Larry. From time to time, I have had buyers tell me what they can afford and that they have talked to their bank about it, but if I were to trust that and spend many hours hunting with them for their perfect home, I am likely to get a big and unhappy surprise when they apply for a loan and find out that they can afford only half what they thought. That's one reason I ask them to get a pre-approval in writing. The other is that some listings require any offer to be presented with such a letter.