The market is holding steady, buyer activity continues and homes are still coming on the market. Interest rates remain attractive, indicating that this may yet indeed be a great time to make a move, whether buying and/or selling.
A buying process should begin by selecting a good lender and obtaining proper loan pre-approval, if you are planning to finance through a lender. Many buyers get frustrated when agents ask for buyers to be pre-approved by a lender prior to looking at homes. A lot of buyers start by looking around to identify what they do and do not like in a home and figure that they can talk with a lender and worry about financing later on, when they find a home they like. We will explain why this unfortunately is NOT the best way to begin the home buying process. For many people real estate experiences could be a lot less stressful and more productive, when all fundamentals are in place from the beginning. The best and most rewarding results of a transaction are happy and excited buyers and satisfied sellers. When working with buyers, we ask for pre-approval to be obtained right away, we want our clients to be prepared and ready and it makes for smoother transactions for everyone involved. While obtaining pre-approval is only one step in the process, it is a major one that sets the stage from the beginning and controls a lot of the course and outcome of a transaction, affecting all parties involved: Buyers, sellers, their families, agents, lenders, title companies and so on. In addition, pre-approval helps us as agents to search for homes in the most effective way and enables us to identify the ones, which may be of interest to our clients and are likely to match overall guidelines, taking into consideration the type of financing and loan program our clients are pre-approved for. Here are some important points:
1.) A Pre-Approval letter shows that you are in a good buying position. Be pro-active. Unless you are in a position to buy a home for cash, you will need some sort of financing. There is nothing more frustrating and disappointing for all parties involved (sellers, buyers and agents), than to look at homes, to find one you really like and then to find out that you may not be able to purchase it at this time, or you potentially miss out on it all together, as someone else also made an offer on the home, who was indeed ready and in a strong buying position at the right time. To avoid this, we will ask for pre-approval. Some sellers are very conservative and even require pre-approval letters prior to granting showing appointments to see their homes.
2.) Pre-Approval lets you know what price ranges to consider. It let’s you know what you could spend, of course you will need to determine what type of a monthly payment you would be comfortable with, based on your lifestyle. This is a good conversation to have with your lender ahead of time. A good lender will work with you to establish what is best for you and to make it manageable for you, taking your lifestyle and financial goals into consideration, aside from just income, credit report and current expenses. Just because a lender gives you a Dollar amount, does not alone establish that you will be comfortable with the monthly payments and other expenses associated with home ownership. Have your lender issue pre-approval based on what is realistically going to work for you, all things considered. It is time well invested to avoid any potential surprises or difficulties.
3) The difference between ‘Pre-Qualification’ and ‘Pre-Approval’. This is an interesting point and we want to clarify what these two terms should really represent. Some lenders issue an informal estimate called a ‘Pre-Qualification’, this shows that contact has been made with a lender, but it is simply an eligibility estimate, based on verbal information a buyer has provided to a lender, which has not yet been verified by the lender. ‘Pre-Approval’ on the other hand should only be issued by lenders, once information about a buyers’ income, credit rating, current debt, etc. has been collected, reviewed and verified by the lender and loan eligibility has indeed been established and approved. A Pre-Approval Letter is the document, which should accompany an offer to show that a buyer is ready, willing and able to buy the home at the present time.
Whether you are a buyer preparing to purchase your new home, or a seller considering an offer on your current home, know that pre-approval needs to already be in place for a smoother transaction.
As always, we are glad to help! Feel free to contact us at (517) 962-8803!
Randy and Yvonne
*Image shown: 7891 Fowler Rd. Horton, MI 49246 – Click here for more information on this great home!