| Why get pre-qualified
and then pre-approved for a mortgage before
you begin your search for a home? Because
there are 3 people who will benefit from your
pre-approval: You, your Agent, and the seller
from whom you eventually buy a home!
You: The most important beneficiary, of
course, is you. One of the most common questions
we get from users of this site goes something
along the lines of "Please let us know
how much house we can afford." We're
stumped! Why? There are simply too many
variables--credit history, income, debt,
special mortgage programs and variations
in qualifying guidelines between different
mortgage types--to answer that question.
The only sure way of getting the question
answered is through pre-qualification. The
mortgage pre-qualification step is a relatively
simple one, but it is an important one.
It begins the process of formally applying
for a mortgage, and it gives everyone involved--especially
you--a clear sense of the direction they
should be headed.
Your Agent: By knowing what your financial
parameters are, your Agent can spend more
time looking for houses that "fit"
and less time pursuing dead ends. No matter
how much you might want a 4000 square foot
home for $275,000, if your qualifications
say $125,000 your qualifications say $125,000
When it comes to mortgages, "yes, but"
doesn't carry much weight!
The Seller: Want to strengthen your bargaining
position? Get pre-qualified. Want your offer
to stand out in a case of multiple offers
for the same house? Get pre-qualified. Look
at it from the seller's perspective. If
you had 2 offers on the table for your house,
one from a fully pre-qualified buyer and
the other from an "I'll get around
to that soon" buyer--to which offer
would you devote the most attention? Even
if the pre-qualified buyer's offer was $1000
less, would you take the chance on the buyer
that perhaps may not be qualified? When
it comes to a seller evaluating offers,
"a bird in the hand..." definitely
applies.
It is important to remember that the amount
of mortgage you will qualify for is the
maximum. It is the amount that the lender
feels you can afford, but it is not necessarily
the amount that you want to pay. It sometimes
is advantageous to be conservative here.
For example, if you qualify for a $100,000
mortgage and you have $15,000 available
in cash for down payment and closing costs,
you are qualified to buy homes with a maximum
selling price of $115,000. So as to not
push yourself to the limit, you may want
to look at homes that sell in the $100,000
to $110,000 range. Too many buyers simply
rush off to the $115,000 level and some
find themselves strapped when it comes time
to purchase necessary items (such as draperies,
additional furniture and lawn and garden
tools, for example) or when they forget
to factor in increases in monthly expenses
(for example utilities and maintenance and
repair costs).
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