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Why
Get Pre-Qualified and Pre-Approved?
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!
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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 $200,000 mortgage and you
have $30,000 available in cash for down-payment and closing costs, you are
qualified to buy homes with a maximum selling price of around $225,000 (that
reserved $5,000 for your closing costs). So as to not push yourself to the
limit, you may want to look at homes that sell in the $200,000 to $220,000
range. Too many buyers simply
rush off to the $225,000 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).
©Copyright 2011 Brenda Jones Real Estate
Licensed in the State of Vermont |
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