Why Do I Need to Be Pre-Approved to Buy a Home?
The phone rang today with a very nice woman on the other end of the line. She explained that she remembered me from visiting her neighborhood, although she isn't ready to sell her home. Hmmm, "I thought, what's this about?" Could it be that she has a question about one of my listings?
It turns out she was calling on behalf of her son who is interested in a home he saw online. After our initial conversation, she relayed her son's contact information and I dialed him to determine when to meet at the home.
Meeting at the home, it was clear there were several questions that he needed answered in order to move forward. Typically, it's my policy to meet at my office to answer questions and explain pre-qualification and pre-approval for a home purchase. But since the home he wanted to see was vacant I decided we could chat there, solving two issues at once.
I followed them through the home and pointed out some features, but mostly remaining quiet to listen. When they had seen the home we settled into the kitchen, standing to chat. They clearly liked the home, but they also had a home to sell.
Asking him questions about why he wants to move I learned that they prefer to move closer to his work place and this move would also benefit his wife's commute to work. I also learned that they both wanted to select a home they both prefer, as their current home was purchased solely by the now husband. Motiviation accomplished!
Second we chatted about what a payment might be on the home we were standing. They were fine with a ballpark number and liked the square footage. The process with this particular couple is actually backward from what I normally require.
The buyers visiting this home with me were not pre-qualified, much less pre-approved. So I explained the difference and why they wouldn't be taken seriously should they desire to move forward with this home.
If a buyer is pre-qualified, he's had a basic conversation with a lender. The lender asks specific questions but does not collect any financial statements to document their ability to repay a mortgage debt. I explained this to the buyers, knowing that this would be an easy conversation.
Second I explained that a seller would not be interested in entertaining any offer from a "pre-qualifed" borrower because no documentation had been submitted. How would the seller be able to rely on ther buyer's capability to purchase a home if they hadn't provided any documentation as to their ability to qualify/pay for a mortgage?
We then discussed that they would need financial documentation submitted as proof of their income and employment so that a lender would feel confident in lending them the money for said home.
Now they began to understand that they were putting the cart before the horse by meeting me at the home without being pre-approved for a mortgage.
It would be even better if a loan officer would then take their file and submit it to underwriting so that the borrower was more than ready to purchase a home by having an underwriter approve them for a loan. This would be a great idea of someone required a shorter close of escrow for a home purchase.
Why Do I Need to be Pre-Approved to Buy a Home means you've done your due diligence before starting to look at homes. Otherwise, you're wasting your time and others by not doing your financial homework first.
And if you're in a multiple offer situation, a home seller will choose the best offer with the best terms. The best terms include being pre-approved for a mortgage.
If you're looking to buy or sell a home in Arizona, give me a call.