SHOULD I GET PRE-QUALIFIED OR PRE-APPROVED FOR A MORTGAGE?

Pre-qualification is a free service. Most home sellers will consider you a serious buyer if you have been pre-qualified. Pre-qualification eliminates a major contingency for the seller. Pre-qualification means that, if everything you submitted to your loan officer is true, you can buy a home up to the limit of your pre-qualification.

Getting Pre-approved is even stronger. Pre-approval means that you have cleared all the application hurdles and have been approved for a loan up to "x" amount which the lender will lend to you if the house appraises and your credit situation has not changed. You benefit by knowing that you will be able to acquire the home of your choice with a selling price up to the approved amount.

Put yourself in the sellers' shoes. A number of buyers are interested in buying your property. One has a piece of paper that says he/she is qualified to buy your property, but they must still go through the approval process. Another is offering a slightly higher price ($1,000 to $5,000), but the offer is predicated on obtaining loan approval. And yet another is offering a price that might even be slightly lower than the others, but they have documentation showing that they are already approved for a loan sufficient to pay that price.

Once a seller enters into a "Purchase and Sales Agreement" the property cannot be sold to another party as long as the conditions of the contract are met. If the sale is not completed because the buyer could not get loan approval, the seller has lost valuable time and the house has to be marketed again. In the meantime, other, qualified buyers may have been lost. A Buyer's Agent will point out the length of time the house has been on the market and every buyer will wonder why nobody else wanted the home. Typically the price received for a property declines in direct proportion to the length of time it stays on the market.

The average price of homes has escalated to a level where a few thousand dollars is seldom the reason one offer is accepted over another. Most sellers are motivated by a desire to return to a normal life. The strongest buyer usually gets the house.

We can provide you with the names of two or three lenders who will gladly pre-qualify you. We advise that you actually get pre-approved though in order to strengthen your negotiating position. You are not required to use a local lender, but it is to your advantage to use someone who knows the area. The title company or closing attorney must work closely with the lender who must contract the services of a local appraiser. Every closing has the potential for some last minute emergency due to an oversight. When all parties are local, problems are much easier to resolve, insuring a smooth and timely closing.