Why you should pre-qualify for a mortgage

So, you are thinking of purchasing a home….

If you have already contacted a real estate agent, I am sure one of the first questions they asked you was the price range you were looking in. Also at the top of their list of questions, they probably should have asked you if you have been pre-approved / pre-qualified for a mortgage through your lender.

One of the first steps in home buying is to find a lender or mortgage broker -whether it is someone you know, someone a friend referred you to, or someone off of a list of folks that your real estate agent has worked with before.

There is a difference in all of those confusing lender titles, but you should make sure you are pre-qualified prior to searching for your new home… A loan officer usually works for a bank or for a mortgage company. A mortgage broker specializes in making home loans to people like you. Mortgage brokers act as the middle man putting lenders in touch with you and vice versa. A bank provides checking, savings, CDs, and similar services, along with lending money.

The reason that seeing a mortgage broker or lender before you begin your home search is simple; You need to know what you can afford. You need to know what amount of money you pre-qualify for prior to putting an offer in on a home. In addition, in today’s market, Sellers want to know that when you submit an offer to them, that you are capable of obtaining the funds to fulfill the offer. Many Sellers require a pre-qualification letter to be submitted with your offer.

Put yourself in the Seller’s shoes for a second…

Imagine you had your house up for sale, and you really needed to sell it in a timely manner. A Buyer comes along, submits a golden offer, an offer you can’t refuse. Several weeks pass while the home is under contract, inspections are going on, appraisals are going on, and all of the sudden, the Buyer says, “I can’t get the loan. I don’t have the money to purchase the property.”

Now, where does that leave the Seller? The Seller has now turned away other offers because the Seller was sure the Buyer was going to follow through with the contract and all would be well. Now, the Seller is left starting from scratch, and hoping that all of the people the Seller turned away (who may have actually had money) come back with another offer.

This is why Sellers want Buyers to have a pre-qualification letter from the lending institution prior to submitting offers. Makes sense now, doesn’t it?

There are other ways to look at the reasoning for a pre-qualification letter:

Suppose you are “guessing” at how much you can afford. An agent takes you out, looks at several homes everyday for a week. Finally, you find one you love. The agent informs you that you need to go see a lender to get your pre-qualification letter for the Seller before putting in the offer. Well, now when you go to the bank, you find out you only qualify for half as much as you thought! This leaves you broken hearted because now you aren’t able to put an offer in on the house you just fell in love with! -Also means a whole week of looking at homes you never could have afforded in the first place.

Also, something that may never cross your mind until you are sitting across the desk from the mortgage broker is that you may have negative marks on your credit report that you were never even aware of. The mortgage broker is going to pull your credit report, and is going to know exactly what your credit rating is. After all, isn’t that how they decide if you qualify for a loan or not? Some things that appear negatively on your credit report may end up being a simple fix. For example, a letter from the company who reported the negative information stating the matter was cleared up previously but not reflected on your report, or a small medical bill that may need to be paid off. (Let me add that I am not a mortgage lender and have no expertise in this field. I am simply stating things I have heard or seen happen in the past. You must ask your mortgage broker for proper instructions on these matters) Regardless, you don’t want to wait until you find your dream house to find out there is something negative on your credit report that prevents you from purchasing a home.

 So, save yourself and your family from a broken heart, save the Seller from wondering if the contract is going to fall through, and always get pre-qualified before you start looking at homes. Then, between the amount you qualify for and the amount you have saved for a down payment, you will have a good idea of a price range of homes you can look at, and more importantly put offers in on.

If you do not know where to begin, you can call Keffer Realty. We will be glad to give you the names of some mortgage brokers we have done work with in the past. In the end, who you choose is completely up to you. We do not receive compensation of any kind for giving you a list of names, and we do not represent or warrant anyone we refer. We simply just want to see you get started on the right foot! Don’t forget, when you are ready to buy, one of our professional friendly real estate agents would love to help you find the home of your dreams! -After all, that is our job!

Remember our services are always free to buyers!

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** This communication is provided to you for informational purposes only. Keffer Realty is not a mortgage lender. You should contact your lender directly to learn more about mortgage products and your eligibility for such products.

Comments

  1. Carrie Lowery says:

    This really was packed with great information. Thank you for posting, I now understand why I should pre-qualify for a mortgage before looking at homes. Sometimes it is hard not to put the cart in front of the horse when you are so excited about something!

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