Importance of getting “Pre-Approved”

The first question most first time home buyers ask me is what they need to do first. My reply is always the same – “Contact a lender and get pre-approved.” Then I usually discuss the importance of getting pre-approved:

  • finding out whether they even qualify to purchase a home
  • determining how much they can spend for a new home
  • finding out what their monthly mortgage payments will be at different purchase prices to determine their comfort level with that payment

Getting pre-approved saves the potential buyer (and others) time and heart ache by establishing not only if they qualify to purchase a home but also what price range they should stay in to be comfortable with the mortgage payment. Here’s a recent experience I had that demonstrates why it’s important.

I have a home listed and we recently received an offer on it. The offer was for full price. The buyer’s agent indicated that the buyer was well qualified to purchase the home and that the buyer was approved by a certain lender but she couldn’t supply a pre-approval letter with the offer and had asked for 10 days to provide one. According to the agent, she had misplaced the approval letter but the lender would provide one the following day.

I called the agent the following day again asking for the letter. She told me that she should be able to send it within a half hour. However, due to the time frame on the offer, I had to present the offer to the seller prior to receiving the approval letter. The seller accepted the major points of the offer – price and terms – but we did a counter offer shortening the length of time to provide an approval letter. I emailed the signed offer with counter offer off to the buyer’s agent thinking we had a sale. Then I met with one of my buyers to show her some properties.

Imagine my surprise when I checked my phone a couple of hours later to find a couple of anxious phone calls and several emails from the buyer’s agent stating that they were going to withdraw the offer because the buyer had met with her lender and when they determined what her monthly payment would be, she had decided against the purchase. Her monthly payment was going to be – what she felt – was beyond her comfort level. She later submitted a withdrawal from the contract.

Now came the phone call that all agents hate to make. I had to call my seller and tell her that the home wasn’t sold after all.

The importance of getting pre-approved prior to viewing properties can’t be stressed enough. Agents should insist upon it and the professional ones do.

Posted In Blogroll, Real Estate Info

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