Prequalify and Preapproval for Your Mortgage: Why and How?
If you've spoken to a real estate buyer's agent lately - or ANYONE AT ALL WITH A TAKE ON THIS MARKET - you've probably been advised to seek out a preapproval for your mortgage. You might also have seen ads and articles about prequalifying.
If you're a first time buyer, it may seem really complex, and putting the cart (wildly) in front of the horse. You might think - hey, isn't that what I've got AFTER I've got a house? Shouldn't I shop first? You'd be forgiven for that, given how it's often portrayed - people glamorize house hunting, and then we see householders making jokes about mortgages forever.
There are two problems with this. First of all, prices in the market vary dramatically, and you need to know what your affordable slice will be. If not, you're wasting your time looking at homes you'll never buy . . . not to mention, the seller's time, the agent's time, wasting gas driving to different sites . . . argh! And you could find yourself deeply attached to a house you simply can't afford to buy. If you know what size mortgage you'll qualify for, you'll spend your house hunting time far more efficiently. This is the pre-qualify process.
Second, without your loan process in order, you will lose a significant bidding edge in this crazy tight seller's market. Sellers are typically getting dozens of offers - most over-asking, too - for their properties. That means they have to look at secondary factors in an offer, to include how certain they can be that the deal will go to closing. If you aren't already nailed down for the loan, a seller may think that you could delay or even scuttle the deal if your lender gets cold feet. This is where pre-approval comes into play: a seller who is looking over offers KNOWS your loan is nailed down, and won't be a factor in holding up an efficient closing. In a pile of offers, that can really standout.
So let's sort out the finer points of how the two processes differ. Bank of America has an article on the subject, with these helpful comparison charts:
You can see that Prequalifying is relatively quick process, and gives a ballpark number for shopping. On the other hand, preapproval is nearly all the way to the goal line - so much more involved. When it's time to close your deal - you'll have done all the heavy lifting and there won't be unpleasant surprises or scrambling for funding.
At Dupuis Team, we STRONGLY encourage our buyer clients to seek the preAPPROVAL option - we want to be able to help you put together your strongest possible WINNING bid, when you find your dream property in this unbelievably tough market for buyers. You need to stand out, and this goes a long, long way. It tells your seller that you are very serious about getting to closing, and are putting all your marbles on the table.
We can suggest many additional strategies to put the shine on your offers, and get to closing in this unprecedented market - give us a ring at Dupuis Team today. We'd love to help see you with keys in hand for your new home!