PRE-QUALIFICATION FOR FINANCING

PRE-QUALIFICATION FOR FINANCING

Getting pre-qualified for a loan by a reputable local lender has several benefits and can eliminate many problems.  And in today’s fast moving real estate market, it’s essential to be prepared to take advantage as opportunities appear (and disappear) very quickly.

The first two points that are important to understand is the difference between getting pre-qualified and pre-approved.  A pre-qualification means that the lender has verified credit and is basing their endorsement on a verbal conversation of income and debts.  A pre-approval from a lender means that they have verified credit as well as received documentation regarding debts and income.  This documentation nearly always includes 2 years of tax returns, 2 months of pay stubs, 2 months bank statements, photo identification and time on the job (2 years is the “standard” timeframe).

Briefly, here’s why it matters to you.

1. Sellers care.  In this fast moving real estate market, a seller is significantly more likely to weigh an offer from a pre-approved buyer significantly more positively than one that has not yet spoken to a lender.  If they have the choice (and they often do have a choice in offers/buyers) between two similar offers and one buyer has been pre-approved and the other has been pre-qualified (or not at all), the pre-approved buyer is sure to have a significant advantage.
2. Knowing what you can afford.  There’s little else more heartbreaking than looking at homes and finding “the one” only to learn (either before or after submitting an offer) that it exceeds the maximum amount the mortgage company will loan you.  And it’s much more emotionally difficult to go down in price range than go up. 
3. Knowing how much it will cost.  You will certainly want to know how much your monthly payments will be as well as interest rate, closing costs and down payment options.  Some loans and buyers will qualify for as little as 0% down payment while others will choose 20% or more.  Knowing these differences is paramount to making the right decision and it’s only possible by talking to your lender.
4. You need to do it anyway.  Unless you’re paying with cash, this is required.  So you might as well get all the benefits upfront versus do the same work later without getting the benefits and taking on all the risk/variables.

And lastly, once you do get pre-approved, don’t change anything.  Buying a new car, applying for any type of credit (cards) or any minor changes can make a difference.

Working with a knowledgeable real estate agent like ourselves that can help you navigate the home buying and financing process is priceless in today’s fast paced real estate market.