A common question I get is "When do I get pre-qualified in the home buying process?" The answer may differ in certain situations but ultimately the advantages of having a prequalification in hand when looking for a house far outweigh any disadvantages:
Situation #1: "I will be buying in 6-8 months, should I get pre-qualified now?" A: The first question I always ask next is: “If you found the perfect home tomorrow, would you still have [or want] to wait?” Before you answer, understand that there is a difference between “having to wait” and “wanting to wait.” I added “want” to the question prompt because sometimes buyers cannot come up with a valid reason for waiting unless there is something that is preventing them from qualifying (usually financial or credit related problems). If there is nothing preventing you from qualifying, then why pass up the perfect home or lose out on a bargain due to delays of getting pre-qualified after the home is found?
Buyers that have a pre-qualification in hand are more in control of the situation. They have the choice to move now or wait. If they choose to wait, they may have to have their credit pulled a second time if the lapse in time from their initial credit check is too long. You can always discuss everything with a loan officer without actually having them pull your credit until the house you want comes along. This way you have an idea of want price range you should be looking in and allow you to finalize pre-qualification faster at the appropriate time.
Situation #2: “I’ve been thinking about downsizing into something smaller than the home I currently own.” A: Take 15-20 minutes and make a phone call to your lender of choice. You may be surprised at what you may qualify for with your current mortgage. This will help you make a more informed decision on your financial future. Many buyers consider purchasing a second property and renting out one or the other. This may add an additional income stream helping with one’s retirement. Although profit margins are smaller for landlords/investors having a mortgage on a home, the current rental demand and rental rates in Arizona are creating situations where homeowners can step into an “instant cash flow” situation by deciding to buy an investment property.
Situation #3: “I want to submit an offer on a home, but I have not been prequalified.” A: You can currently submit an offer on a home in Arizona with no proof of funds or prequalification. Is it advisable? Not exactly – for at least two reasons. First: What if you cannot qualify for the amount you need to purchase the property? Then you are wasting your time, your Realtor’s time, and the seller’s time. Second: if multiple offers are submitted on the same property and you have not included proof of pre-qualification; your offer may not be considered as strong as others. If they accept your offer they are taking a chance that you may not qualify and the other potential buyers may be long gone by the time it is figured out, thus wasting their time which could be critical depending on their situation.
Do get out there and start looking for property, but be sure that you are working on your prequalification and you are comfortable with the payment you will have. Be reasonable with yourself and always stay within your budget!
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