Benefits of Pre-Qualification

If you’ve ever been sent out to shop for a house only to find out the financing will not work, or if you’ve had clients go through it, you may already know that a pre-approval is not a guarantee.  For those that have not had that unpleasant experience yet, hopefully this information can spare you from a similar fate.

But The Bank Said I Could Buy More

A client walks into her bank and after providing basic employment information, assets and permission to pull their credit, the representative punches the numbers into a mortgage calculator and she is told she can purchase up to $400,000.  Great!  But wait, they didn’t look at your paystubs, down payment information, or add in the property taxes and heating that will also determine whether you can purchase that amount.  If you haven’t supplied documents to prove your income, employment, and personal details; boil it down and all you have is a rate hold.  Lenders call this a pre-approval but it really is a rate hold.

Pre-Qualification – The Devil is In the Details

If you have been a client of mine, you know you supply documents up front.  This allows me to go through them and spot anything that may be an issue with lenders BEFORE you write an offer.  It also allows me to calculate a realistic purchase price.  I include an anticipated property tax and heating cost amount.  I ask questions about whether your employment is permanent or probationary, or whether you owe income taxes.  Small details can have a big impact on your purchase.

Benefits of Pre-Qualification

There are a lot of reasons a pre-qualification can make your home buying experience less stressful:

  • Know the “real” budget – Don’t look at homes you can’t even afford or rule out a higher budget that you assume is out of reach.
  • Speed up closing – The financing process can be much faster if you have the majority of paperwork collected ahead of time.  A good mortgage advisor can diagnose and manage many of the most common financing barriers early on.
  • Competitive advantage in multiple bid situations – If you end up in a multiple bid situation, being pre-qualified makes you more attractive to the sellers.
  • Reveal speed bumps before they prevent you from buying – Often financing barriers such as credit, employment issues, and even legal issues or separations can impede a deal.  If these are known upfront, they can be dealt with and resolved before you are negotiating on a home.

Part of my job is to do a thorough pre-qualification. I explain the purchasing process and how financing fits in, and provide an overview of your options and purchasing budget.   You’ll feel empowered and prepared to find your new home!