You have been looking and looking for that perfect house… and, finally you think you’ve found it! What next?
Well, most experts agree that before you make an offer, you should get pre-approved for a loan. This gives you almost as much power as a buyer with all cash.
Pre-approved or Pre-qualified?
… These are the two separate processes realtors can recommend to buyers:
- Pre-qualifying involves a chat with a lender – often over the phone – during which you state how much you make and where you work.
- Pre-approved means that you have gone through the formal process of applying for loan approval. Obtaining a pre-approval is optimal, and gives you more leverage with any negotiations with the seller.
The pre-approval process
Get started by printing and filling out a Uniform Residential Loan Application and Statement of Assets and Liabilities available at the Freddie Mac website. Take the package to lenders to shop for price and terms. Ask your lender to write a letter you can show sellers saying you’re pre-approved for a loan.
Some suggest that buyers show a seller that your lender will let you borrow even more than the home costs. This is not to signal that you’ll pay more, but that your offer is less risky than others.
The benefits of a pre-approval
Your pre-approval offers a seller confidence that:
- Your offer won’t fall through (as some do) because you can’t get financing;
- The sellers will get their money more quickly, in 10 days to two weeks instead of the 30 days a bank typically requires to approve a loan.