Why Do I Need to Be Pre-Approved to Buy a Home?

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Real Estate Agent with Value Added Service, 602-620-2699 SA5376460000
https://activerain.com/droplet/55jF

 

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. 

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Rainmaker
3,204,954
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Jan you are more gracious than I would have been, this type of conversation would have been on the phone or via email and no showings until we were on the same page:)Endre

Jun 19, 2017 11:29 PM #1
Rainmaker
1,436,373
Kat Palmiotti
406-270-3667 (MT), 914-419-0270 (NY), Broker in NY with Grand Lux Realty and in MT with (coming soon!) - Kalispell, MT
The House Kat

Hopefully those buyers called a mortgage broker right after that conversation to get started on a pre-approval!

Jun 20, 2017 03:10 AM #2
Rainmaker
4,082,206
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Jan, these buyers were fortunate to meet you to discuss the approval process as well as the purchase process.  Hope you get this home under contract.

Jun 20, 2017 05:15 AM #3
Ambassador
2,777,833
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Jan - Excellent example to explain the importance of getting everything in place so that when the right home is chosen, the best possible offer can be made.

Jun 20, 2017 10:44 AM #4
Ambassador
3,090,321
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Having a pre-approval letter from a lender is a must to go with any offer.  So why go house hunting until you have one?

Jun 20, 2017 12:45 PM #5
Ambassador
3,982,999
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

You uncovered their motivation and explained why they need to see a lender. Now if they don't you also know they may not be serious.

Jun 21, 2017 06:36 PM #6
Rainmaker
978,622
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Thank you Endre Barath, Jr. . I was actually meeting 2 sets of clients at once if you think about it.  The parents live in my farming neighborhood and their son and his wife live nearby - a double bonus to meeting them and being the go to person for both sets of folks! 

Actually, they stalled the purchase so that the buyer could finish his MBA. It was a good exercise that I normally wouldn't have done except that both his parents and the son and wife were out that day - so 2 sets of potential clients.

Fingers crossed   Joan Cox !

Thank you Dick Greenberg .  In todays fast moving market, it PAYS to be prepared. 

Jun 22, 2017 02:16 PM #7
Rainmaker
978,622
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Exactly Chris Ann Cleland .  I couldn't believe they were looking at houses to buy without having done ANY homework.  We spent at least 45 minutes in that house explaining the process and why they wouldn't be taken seriously as buyers. 

You're right  Debbie Reynolds .  I chose to meet them because they have a home to sell and their parents live in my farm neighborhood, 2 possibles.  Thank you for commenting!

Jun 22, 2017 02:18 PM #8
Rainmaker
3,204,954
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Jan well now that is a good day after all well worth it and you are getting rewarded for your kindness, Endre

Jun 22, 2017 11:25 PM #9
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Rainmaker
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Jan Green

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN
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