One of the most important steps in the home buying process is receiving pre-approval for a home loan. The pre-approval process is actually the very first step toward the home buying process regardless of whether you are a 1st time home buyer or you have been around the block several times and purchased several homes.
The very first step is still the pre-approval / pre-qualification process regardless of price range. Many buyers confuse pre-approval with pre-qualification, but they are actually very different. When a buyer is pre-qualified, the lender has determined how much he/she can borrow based on information the buyer has provided to the lender. However, none of the information has been verified. The buyer must still fill out a loan application and go through the lender's approval process at a later date.
These days it has pretty much become a requirement to be pre-approved before you visit any property. Due to the economy, as well as real estate and mortgage requirements, most Buyers Agents require clients to be pre-approved before you can visit and tour properties. Additionally, nearly all Foreclosure, Short Sale, HUD and REO properties require that a Pre-Approval Letter from a Lender be included in the package when submitting an offer on a property. Sellers and their Agents are now reluctant to have strangers in their home if the prospective buyers have not been pre-approved/pre-qualified for a mortgage. If you put yourself in their shoes, it is perfectly understandable. Why should any Seller race around getting his/her house in "show shape" for your arrival if you -- the prospective buyer is not qualified to purchase the home?
Why is pre-approval important at the beginning of the home buying process?
Here is a true story that illustrates the importance of the Pre-Approval Process. This actually happened as recent as Tuesday, July 6th.
A family faced with a relocation from North Carolina to Georgia saw what they perceived to be their "ideal" Georgia home during an on line search. They called a local agent in Georgia on Sunday afternoon, July 4th to inquire about the home and schedule a visit and tour. At the time of their call the property was showing up as an Active Listing. On Tuesday July 6th, the family drove 4 hours from North Carolina to Georgia to visit the property and place an offer.
But guess what!
The family had not been pre-approved or pre-qualified prior to their visit. This meant they could not not place an immediate offer on the property which turned out to be "perfect" for their needs. The agent referred them to a Lender who immediately began the pre-approval process. The lender needed 24 to 48 hours to research the information and get them processed. The Lender worked fast and was proud to have a pre-approval completed within 38 hours.
After receiving the lenders approval, they made an offer on the property only to find out that the property was no longer available! OH NO! PENDING SALE! How could that be?????
Guess what?
As the agent and clients were leaving the property 2 days earlier, another agent and her clients drove up to visit the same property. The second prospective buyer had already been pre-approved. They already had a pre-approval letter and they were already qualified to visit and make an offer on the house. As a result, they did exercise their right to make an immediate offer on the property. The offer was accepted within 24 hours. They were under a Binding Agreement.
Moral of the Story?
YES!
Get the pre-approval process out of the way BEFORE you go to see your first house. The pre-approval process is sure to save you a lot of heart-ache later.
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