Ever had an agent deny to show you a home because you weren’t pre-approved for a mortgage? It’s not because they’re mean, or they don’t value your business… it’s actually because they’re looking out for your best interests. There are reasons to get pre-approved before looking at homes.
Getting pre-approved will save you from disappointment. Imagine spending weeks on end searching and touring homes until you finally find the perfect home. The dining room is big enough for your table, the master suite has his and hers closets, and the kids have picked their rooms with no fighting. Just perfect!
You cheerfully tell your agent “this is it, let’s make an offer“. Your agent says “great, please give me a copy of your pre-approval letter to present to the seller along with your offer“. Your agent knows home sellers are not likely to accept an offer from a buyer who has not been pre-approved or pre-qualified for their financing unless of course the offer is for a cash sale.
Sellers want some assurance that when they enter into a contract with a buyer, the buyer can close the deal and not risk losing time off the market. Slightly discouraged you arrange to meet with a lender to apply for your loan. During the application the lender checks your credit history and finds a problem that you were not aware of. This problem must be cleared up before your loan can be approved. Meanwhile the seller accepts an offer from another buyer who has been pre-approved. Major disappointment right?
Let’s face it, shopping for a home before getting pre-approved for a mortgage is like walking into a grocery store without a wallet. You may have the desire to buy, but you lack the ability. Below are 6 reasons to get pre-approved before looking at homes. Let’s cover some basics…
What is a mortgage pre-approval?
In a nutshell, a mortgage pre-approval is written assurance from a lender or broker that you’re able to borrow money to purchase a home up to a certain amount. It’s based on the income, employment and asset documentation you supply at the time of application, in conjunction with your credit history. So let’s look at the 6 reasons you should get pre-approved.
1. It carries more weight than a “pre-qualification”.
A pre-approval differs from a pre-qualification. With the former, the lender has actually checked your credit and verified your documentation to approve a specific loan amount (usually for a particular time period such as 30, 60 or 90 days). A pre-qualification can be useful as an estimate of how much you can afford to spend on your home, but it’s a less accurate indicator of your ability to purchase. A pre-approval always carries more weight.
2. You’ll know how much house you can afford.
Getting pre-approved before you begin house hunting allows you to know how much house you can realistically afford. Knowing this narrows down the options and makes the selection process more efficient. Not to mention, it protects you from the unpleasant surprise of realizing the home you fell in love with doesn’t fit your budget.
3. It adds clout to your offer.
In many markets, homes attract more than one offer. If the sellers are weighing one offer against another, they may lean towards the one accompanied by a pre-approval letter. That’s because pre-approvals instill confidence that the buyer is financially capable of purchasing their home.
4. It could increase your negotiating power.
In addition to strengthening your offer when compared to buyers who haven’t taken this step, getting pre-approved may give you the upper-hand when negotiating the price. If the homeowner is eager to sell, they may be more willing to accept a lower offer from someone they’ve been assured is financially capable of purchasing their home.
5. It saves time.
Another reason to get pre-approved is that it saves time. Obtaining a mortgage is a lengthy process. Getting pre-approved ahead of time shortens the time between contract to close — this way you’re ready to proceed with finalizing the mortgage once you’ve found the home you want to purchase. The ability to close quickly can also make your offer more attractive to the seller particularly when competing with multiple offers.
6. Without it, most agents won’t work with you.
Makes sense, too. Right? Think about it: when you hire an agent, he/she will invest countless hours showing you homes over the course of your house hunt. If you were in their shoes, wouldn’t you want assurance that your hard work would lead to a favorable outcome for both you and your client?
Now that you know the 6 reasons to get pre-approved the next step is to contact a lender. I always recommend working with a local lender. I realize that there are many online companies offering to rocket you through the approval process but I can assure you that nothing beats getting face to face with your loan officer or mortgage broker if and when problems arise. If you are in the Jacksonville area and would like the contact information for local lenders I personally would recommend call me at (904) 994-0493 or email me at email@example.com. I’ll put you in touch with mortgage professionals I know will do a good job for you.
Once you have been pre-approved it’s time to start looking. Begin your search by contacting me and let me know what you are looking for. I will search area listings and send you information on all the homes that match. If you prefer to begin your search online click Search MLS for direct access to the North East Florida MLS and the most accurate and up-to-date listing information available.