Years ago, a person’s word and promise to pay for a home would have been enough to seal a real estate deal. But the days of the handshake deal, golden though they were, are gone. In today’s housing market, words like “pre-approval” and “pre-qualified” and “adjustable-rate mortgage” get thrown around with little to no explanation of what these things are, much less what they mean to you as a buyer.
One of the most important things you can do, whether you’re buying or selling, is learn the basics of buyer pre-approval. What does it mean to be pre-approved, why is it important, and how can you do it?
What It Is
Buyer pre-approval simply means that a lender has looked at a potential buyer’s credit history, job history, and financial situation to determine whether and how much to lend to them. Once these determinations have been made, they’re put into a letter, which then goes to the seller’s agent during contract negotiation.
Why Get Pre-Approved
Pre-approval carries a multitude of benefits for each side of the negotiation. For the buyer, the process of becoming pre-approved can provide a complete picture of their finances, and identify any problems early, giving them time to correct them. And between a buyer that has been pre-approved and one who hasn’t, sellers are much more likely to contract with the pre-approved buyer.
The seller, on the other hand, can have peace of mind, knowing that an outside party has looked into the buyer and determined that he or she can afford the property under contract. This, in turn, can lead to a faster closing and an all-around smoother transaction.
How to Do It
- Submit a loan application, preferably to a local lender
- The lender will run verifications such as a credit report and job history
- The results are put into a letter, which you can bring to any negotiating table
The world has changed since the days of the handshake promise, but that doesn’t mean that homeownership is out of reach. With a little extra effort and a pre-approval letter, you’ll be under contract and into your dream home in no time.
Still have questions? Contact me for an overview of the process, or for a lender recommendation, by calling (931) 526-4455 or by using the contact form on this website.
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