Friday, September 16, 2016
By Admin

If, as a prospective house buyer, you were to ask us what's the single best piece of advice we could give you right now, we'd not hesitate to say: "get pre-approved for your mortgage".

In fact, with low inventory of available homes for sale this has become an even more important pre-requisite.

To explain why we say this, imagine for a moment that you are selling a home in the Albuquerque area right now. You're in a great position, because there are many buyers chasing a slimming number of available homes. Indeed it's quite possible that you'll receive multiple offers for your home, maybe even above your asking price.

So let's now picture you in the fortunate position of sitting down to consider the offers you've received and let's say you're having to decide between three fairly equal offers. One of the buyers is able to demonstrate that he has been pre-approved for a mortgage that matches the offer price, while the other buyer proudly declares he is pre-qualified for his home loan, again matching the offer price. The third buyer, being somewhat less well prepared and having viewed your home on the spur of the moment, has not even applied for a mortgage yet...

Given that you're looking at a reasonably even playing field here, price wise, you will naturally want to go with the buyer who can you show the best ability to buy your home.

So let's assess our three buyers on that basis.

While our buyer with no mortgage credentials may well be able to get a home loan, he/she represents something of a risk to you as the seller. If you accept this offer, then the other two buyers will, understandably, start to look elsewhere and may lose interest in your home, while your selected purchaser starts the mortgage application process. It may work out fine, but if that buyer turns out to have been overly optimistic and is turned down for the loan, you will be left high and dry and will quite possibly have to start selling from scratch once more.

So, let's put that offer to one side and look at the buyer with pre-qualification.

All too often, there is a belief that pre-qualification is a guarantee of obtaining the necessary finance. Unfortunately this is not so. Pre-qualification is essentially a lender's best guess at what the borrower can afford.

It is not a cast iron promise of a home loan. So, while it certainly would be a better bet than going with the buyer without any indication of eligible financing levels, there is still some room for doubt.

Which brings us to our pre-approved buyer.

In this case it's all good news. Pre-approval means that the buyer is in receipt of a lender's firm commitment for a certain level of home loan, based on a pretty forensic analysis of his/her finances. Given that we've said all else remains pretty equal here, it's clearly something of a no-brainer that this is the buyer offer we want to accept.

OK, enough of the make-believe stuff. However, we hope this example shows you how critical pre-approval now is, where there is often a competitive situation to secure a home. Without it, you are putting yourself at a huge disadvantage to other better prepared buyers.

But the benefits of being pre-approved don't end there. By knowing what level of expenditure you can go to, your negotiating power with sellers is greatly enhanced and you will be able to conduct your home search in a far more focused and time efficient manner. To summarize, it just makes the whole process a lot smoother and less stressful.

So if you haven't made a start on applying for a mortgage, even if you've yet to begin searching for property, this is the ideal moment to click here and get the ball rolling.

As always, contact us to ask us any questions related to this or any other real estate matter.