WHY You Need a Pre-Approval

WHY You Need a Pre-Approval

 

 

     You've heard it before.  If you're going to buy a home one of the very first items on your 'to do' list needs to be obtaining a pre-approval from a lender.  Not a pre-qualification (know the difference between a preapproval and prequalification?).  Some of the more common reaons on why a pre-approval is necessary involve making sure credit is OK, making sure documentation meets lender guidelines, and giving sellers a warm & fuzzy feeling when you walk into their home.  These reasons are important, but what about the "perfect" people?  The ones with blindingly shiny credit, eyebrow raising income, assets with plenty of 0's at the end, and an overall profile that leaves banks picking their jaw up off the floor.  Well, you need a pre-approval, too.  A complete one.  But WHY?  We'll get there.

 

 

The Basics

 

     If you're not pre-approved and you're not a "perfect" buyer, you're kind of wasting everyone's time (I added 'kind of' to sound nice).  But seriously - you're asking a real estate professional to take their time to meet you, learn what your wants and needs are, and to spend time finding the perfect places for you to call home.  THEN, they're meeting you to tour these homes, hear why you don't think they're so perfect, and go back to the drawing board to find more based on your feedback.  Nobody's complaining, this is all part of a great career, but would you do all of that with 0 chance of ever seeing a dime of compensation? 

 

 

     Let's face it though, you're a decent person so you probably care about your real estate professional that's working their butt off for you, but what's really important is you.  Do you want to go out, fall in love with a certain price range, style of home, or area, only to find out you've got no chance at buying, or a few years of work and planning to do before you can get what you want?

 

 

     In a hot market, the time between putting in an offer and agreeing to close is often one way to gain an advantage in a multiple offer situation.  Even if you CAN get preapproved, there may be some things you can do to reduce your interest rate along the way - with a short escrow or contract period, you may not have the luxury of that time.  Wouldn't it be nice to have some extra time to consider these things that could potentially save you thousands of dollars.  With a pre-approval, you'll have that time.

 

 

If you made it this far and are still thinking "But I'm PERFECT!" this next one's for you:

 

 

     Let's say you're in a hot market and are working with an agent that's agreed to show you homes without a preapproval.  You find THE ONE.  This home's got it all, and is (almost) as perfect as you are.  The listing agent requires a pre-approval letter when an offer is submitted.  "No problem" you think, and you call your trusted loan officer to work on one for you.  Your loan officer gets it back to you in what seems like no time at all, your agent gets ready to send over your offer, annnnnnd just like that, it's gone.  While you were getting your preapproval, someone (less perfect, no doubt) came through with the pre-approval they obtained before they looked at the home, and made the seller an offer they couldn't refuse (even if the offer was less desirable than yours may have been). 

 

 

     A full pre-approval protects everyone.  Buyer, seller, agents, and lender.  Is it an inconvenience?  NO.  Not if you're serious about buying a home.  If anything, it just gives you a head start by providing your lender with documentation they'll need anyway once you find a home.  If your real intent is to buy a home, a pre-approval prior to looking at homes is a must.  Especially in a hot market, you DO NOT want to miss out on a chance at your dream home because you don't have your preapproval done already.

 

 

Interested in buying a home and need to get pre-approved?  This is a good place to start.

John Meussner

NMLS# 138061

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