Posts Tagged ‘preapproval’

Will Lack of Home Inventory Curtail Spring Selling Season? Buyers: Prepare

Thursday, March 24th, 2016

Many agents and home buyers are aware of the current shortage of homes for sale in many areas. In California there is currently a 4 month supply of homes, where 6 months is the norm and heading into the Spring it usually is higher. When desirable listings do come onto the market there is a rush of activity and often a quick sale. What will happen to the normally busy Spring selling season if inventory levels do not grow?

With interest rates still low and inventory levels down, it is more important than ever for buyers to be as prepared as possible to write a successful offer. Before buyers even start looking at homes, it is important to make sure to do the following:

1. Get preapproved. This is essential. You need to speak with a mortgage professional and get preapproved – not just prequalified – so that you know exactly how much of a loan you can afford and what you will need for a downpayment. There are different products out there so make sure you know which loans will work best for your circumstances. Talk to a qualified mortgage professional and get the preapproval letter before you start home shopping so you are ready to make an offer.

2. Find a good real estate agent. It is great to look at homes yourself online – in fact I always encourage doing so – but to have a skilled agent on your side provides you with an edge. Local area agents often hear of listings before they hit the market, or may even have “pocket” listings (contracted upcoming listings that are not yet on the MLS) themselves. Also, when a listing is on the MLS there may be important confidential agent remarks listed (that only MLS subscribers can see) that could help you prepare in writing an offer. Finally, some third party real estate sites do not list new properties immediately because they don’t sync directly with MLSs, so you may miss out on new listings that other buyers have already seen – even a day can make a difference in a tight inventory market.

3. Write the strongest offer possible. Depending on the circumstances you need to be ready to write the best “on-paper” offer possible, especially in situations where there are multiple offers on a property. Of course, you may not be able to compete with some things (for example, if another buyer is a cash buyer or offers over asking price when you are not qualified to do so), but it is still important to make the offer look as good as it can. This is another reason to have a strong agent on your side – she or he will advise you of the best tactics after assessing the situation, the comparable sold properties, the market and speaking with the listing agent. Your offer still may not be chosen, but there is a chance the one that is chosen could fall through, so you want to be the next best.

4. Be Ready! Make sure you are accessible by phone/text and email, and that you are able to view properties as soon as possible once they list. If a property lists on a Thursday and it looks like a home that meets all your criteria, waiting until the weekend to view it may increase the competition. Even in cases where the seller wants to wait the weekend to evaluate offers, getting yours in first could put you in a better position.

5. Keep an open mind. Check out homes that you may not necessarily find appealing on line, or may not be in your preferred neighborhood. Sometimes buyers reject seeing a listed property, only to later realize that it could have been a great home for them. Pictures can be deceiving, and for the right price a home that needed something to make it “perfect” – like a little updating, could be a great home for you at the right price. The same goes for a home outside of your desired neighborhood.

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Pre-Qualification vs. Preapproval: Do You Know the Difference?

Friday, June 15th, 2012

Do you know the difference between a pre-qualification and a preapproval for a mortgage? Surprisingly, many buyers – and even many agents – do not. It is important to understand the difference before you prepare to search for a property.

Pre-Qualification: When a buyer gets pre-qualified for a mortgage, it means that s/he has submitted information to the lender regarding employment/earnings and assets. The borrower discloses what amount s/he has for a downpayment, and provides the lender with a credit score. Not much digging is done to verify the information, and pre-qual letters are fairly easy to obtain.

Some lenders require proof of funds to be shown (which can be done by submitting a bank/securities statement), and pre-qualification letters state that a loan will be granted based on the borrower’s ability to satisfy the conditions – they are not a guaranty for a loan. These letters are the most common types presented with offers, as many banks can evaluate a borrower, but cannot truly evaluate whether s/he can purchase a particular property until they have a fully executed contract and related documents.

Preapproval: Getting preapproved means that a lender took the time to look at a potential buyer’s documentation of income and assets. Credit scores are pulled, and the buyer is examined more thoroughly. Borrowers must provide 1099’s, W2’s, account statements, employment stubs and other information if necessary. Once the preapproval is drafted it is still not a guaranty that the borrower will get a loan. There are other conditions that must be met, which will become more clear once a property is identified for purchase.

No matter which type of letter is obtained, it is important to obtain one before writing an offer so that the buyer looks strong in the presentation. Many listing agents will not respond to offers unless there is a preapproval or pre-qualification letter submitted simultaneously.

Interestingly, most listing agents do not scrutinize whether a borrower submits a preapproval or pre-qualification letter (and I have found that many do not even know the difference), but many do ask that proof of funds (funds necessary to cover any downpayment) be submitted with an offer and the letter. None of these things provide iron-clad proof that the buyer will qualify for the loan, but they do reassure the seller and listing agent that the potential buyer at least looks positive on paper.

It is important in today’s market – where we are seeing many properties obtaining multiple offers – to look as strong as possible. Taking the extra time at the start to obtain a preapproval is a smart decision that could mean the difference between getting your offer accepted over that of another buyer.

If you are considering purchasing a home, it is important to consult with a mortgage professional right away, so that you can figure out for how much of a loan you will qualify. This will allow you and your real estate agent to focus on properties in the right price range, providing a better chance that you will be able to successfully qualify for a loan when you find the right home.


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