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Pre-Approval Don’t Leave Home Without It

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So, you are ready to buy a home? Congratulations! You are eager, you start to go to open houses, scour home décor magazines, and excitedly tell your friends and family.

You can all but imagine the feel of new carpet on your feet as you walk into your new home! All of this is fantastic and don't stop, but pump the brakes just a tiny a bit. Please do not pass go, do not collect another open house flyer, go straight to the bank and get your pre-approval!

Real Estate Hath No Fury Like A Seller Scorned

Why? I don't want you to find your dream home and get into a tug of war with a seller who doesn't want to take your contract seriously because they are not sure if you have the funds available to buy their home. What if you are in a multiple buyer situation? Well, you can kiss your dream home goodbye if you have other buyers who have a pre-approval and you don't.

What if you meet a homeowner who has had a deal fall through due to financing? This is definitely not an ideal situation to be in when trying to procure one of the largest investments you will partake in. How do you think this seller will treat your contract with just a pre-qualification? You need all the leverage you can get when buying your home. Don't lose what is your best card by not doing your due diligence beforehand.

Pre-Approval Don't Leave Home Without It

You wouldn't go to the store without your wallet, right? Even if you were "just looking" you still would have your wallet just in case something catches your eye? Well, home searching without a pre-approval is like going to the store without a wallet. You will be perceived as just window shopping. This translate to a seller not taking you as seriously as you would probably want them to.

Pre-Approval Are You Marriage Material

So, what exactly is a pre-approval and how exactly is this different from a pre-qualification? Wonderful question!

Let's start with a little analogy. Suppose you are going on your first date. You are going to ask questions to try and find out if the two of you will be a good match right? These questions will usually be quite superficial, after all, you are just trying to find out if you want to see this person again.

Prequalification works this way. You see the bank is asking superficial questions trying to find out if it might be a good match. The hard questions are not forthcoming right now.

Much like on a first date, if the bank started the date by asking you how many children you wanted, you might be asking for the check!

During prequalification, the bank essentially tells you the likelihood of you qualifying for a loan. It is not a promise and could change once they pull your credit.

Pre-Approval, on the other hand, takes it much further. You are now no longer on a first date. The bank is past the getting to know you stage and now wants to know if you are marriage material. So, the harder questions come.

When a bank begins the pre-approval process they are formally verifying the information you gave them is accurate such as:

  • Credit history

  • Financial obligations

  • Job History

  • Financial Stability

An underwriter then takes all this information and comes up with an amount you qualify for. This is as close to cash as you can get.

This announces to a potential seller barring any unforeseen issues you will be able to buy the home you are placing an offer on. This is music to a seller ears' and if you should be in a bidding war for a home, your offer will be taken a lot more seriously.

So, don't be the buyer putting in an offer without a pre-approval. Your time is precious, you don't want to leave your next home to chance. Do the legwork beforehand.

Buying a home is stressful enough. There are a lot of things out of your control, don't let a pre-approval be one of them.

How has your experience been with getting a preapproval?

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