Home Buying Process

Mortgage Pre-Approval vs. Mortgage Pre-Qualification | There's A Difference

Mortgage Pre-Approval vs. Mortgage Pre-Qualification | There’s A Difference

I was recently having a conversation with a first time home buyer and the question came up of whether there’s a difference between a pre-approval and a pre-qualification. The simple answer is yes there’s a big difference. Read this article to find out what the difference is and why it matters when you’re buying or selling a home.

 

What Is A Mortgage Pre-Approval?

For starters a mortgage pre-approval is not a guarantee you will get the loan but, it’s the closest you can get to that guarantee. There are still conditions such as locating a property, no change in your creditworthiness, and likely a satisfactory appraisal that will have to be met. The appraisal can vary in some cases. Aside from that, the pre-approval being issued means the lender has run your credit, verified your income, verified your employment, and reviewed your financial resources such as savings or retirement accounts.

 

checklist

 

What Is A Mortgage Pre-Qualification?

A pre-qualification means a lender has given an estimate of what you may qualify for based on information you have provided. The lender may or may not run your credit. Verifying income, employment, and financial resources is not part of a pre-qualification. It simply gives you an estimate of how much you can borrow.

 

What’s The Difference In Being Pre-Approved And Pre-Qualified?

Obtaining a mortgage pre-approval is a far more in-depth process. You will have completed a loan application and submitted financial documentation to your lender vs. just stating what your income is. The lender will run your credit and process the application through an underwriting process in order to then issue the pre-approval.

 

approved

 

Why Is A Pre-Approval Stronger In The Seller’s Eyes?

Having a pre-approval attached to your offer is stronger than a pre-qualification in the seller’s eyes because they then know a lender has obtained and verified your financials. It’s not just a ballpark estimate of what you may qualify for based of what you stated to the lender. If you have no idea what your financial situation is and are just starting to think about purchasing a home getting a pre-qualification is a good start. When you’re ready to buy and it’s time to start touring homes, a pre-approval is a must.

 

How Does A Pre-Approval Benefit A Buyer?

A pre-approval doesn’t just benefit a seller. It also benefits a buyer because it will determine what loan programs are the best option, the amount of your down payment, and give you an idea of what your interest rate will be. It doesn’t lock in your rate but, it does provide an estimate based off what rates are when it is issued.

 

It will also inform you of what the maximum sale price is that you are pre-approved for. That doesn’t mean you have to spend the max amount but, it gives you a baseline to work from so that you and your agent know what price range to look for homes in.

 

If you’re still not convinced that you need to get pre-approved vs. pre-qualified here are a couple closing thoughts.

 

Think about if you find a home you want to make an offer on and your agent finds out there are other offers on the home. If you haven’t been pre-approved yet it takes time to accomplish that step and in the meantime the seller may elect to accept someone else’s offer. You could opt to submit an offer with your pre-qualification letter but, the odds of a seller selecting your offer over one that has a pre-approval attached are slim to none.

 

 

I advise my sellers not to even consider an offer that doesn’t have a pre-approval included with it. If I’m working with a buyer I will not show homes until my client gets pre-approved. Excellent agents who have a high level of expertise do the same. As a buyer when you are ready to buy a home getting pre-approved is one of the first steps. It not only shows sellers you’re serious it also sets you up for a successful purchase.
 

Additional Resources -
Tips For Paying Off Your Mortgage Early via Anthony Sarandrea

How To Pick A Neighborhood You'll Love When Buying A Home

How To Pick A Neighborhood You’ll Love When Buying A Home

Real estate and details go hand in hand and when you’re buying a home there are a lot of details to consider. When you purchase a home you’re making a commitment to more than just the home itself. You’re also committing to the neighborhood it’s located in.
 


In most cases, you’re going to be living there for at least a few years and on average homeowners stay in their homes 7 years. There are certain things you should consider before you purchase a home and the neighborhood it’s located in is one that can often go overlooked.

 

Crime- what you consider safe might not be the same as someone else. Do your research and look into crime statistics for neighborhoods that you’re interested in. Check out the local police department website or visit www.crimereports.com.

 

crime

 

Parking- is a garage or assigned parking important to you? Think about if you desire to come home and know exactly where you’ll park or if you don’t mind looking for parking. Another consideration is parking for when you have guests visit. If you’re throwing a dinner party is there a place for your guests to park either in the form of your driveway, visitor spaces, or street parking?

 

 

Walkability- do you want to have the ability to walk to metro, the grocery store, or shopping and dining? Many home buyers look for a home in a location condusive to walking to daily needs, work, and entertainment. Neighborhoods that have a high walkability often experience higher home values due to their prime location.

 

 

Homeowner’s or Condo Association – this is a question that comes up a lot and some homebuyers don’t want to be in a neighborhood that has one. Association management varies by neighborhood and like anything else some are excellent and truly provide value while others are poorly run and a complete disaster. Work with your agent and do your research to obtain as much information as possible if you’re considering moving into a neighborhood with a homeowner’s or condo association. I’ve had clients who love them and clients who have moved because of them.

 

Amenities- if you prefer a neighborhood with certain features such as an outdoor pool, fitness center, tot lot, lake, or walking trails you’ll be able to eliminate certain neighborhoods and focus your search on those that have what you’re looking for.

 

 

Think about what’s important to you for a neighborhood to feature and consider the little details in your day to day life. Your commute, hobbies, and lifestyle are all something to think about when selecting a neighborhood to purchase a home in. Do your research and lean on your agent to help you get answers to your questions.

 

If you know what you’re looking for you will end up making a choice you love both with your new home and the neighborhood it’s in!

 

Additional Resources

Do Not Buy The Best Home On The Block via Luke Skar with Inlanta Mortgage of Madison

 

Looking For The Right Neighborhood via Joan Cox, Denver Real Estate Broker/Owner of House To Home

 

 

Tips For Millennial Home Buyers

Tips For Millennial Home Buyers

Millennial home buyers are defined as someone who is in the 18-35 year age bracket. Many millennials have thought about purchasing a home but, due to rising home prices and student debt haven’t taken the leap.

 

Although millennials have seen the struggle in real estate during the recession the dream of home ownership is still alive and well. The majority of millennials want to buy a home and there are options available for that to become a reality but, it takes proper planning and a little patience.

 

Real estate should be viewed as a long term investment. There will always be ups and downs but, if you’re looking at it from a long term view and are in a good financial position it’s something to seriously consider.

 

Deciding between renting and buying is a big decision. Think about the long term and years from now you will likely be glad you opted to buy instead of rent.

 

Real estate is not a get rich quick scheme. It takes hard work and patience.
 


Millennial Home Buyer Tips
 

Work With An Agent You Trust

This tip really applies to every home buyer but, as a millennial you’ve most likely never bought a home before so it’s extremely important you pick an agent you can trust. Your agent will (and should) know more than you and because of that, you will be relying on their advice. Ask for referrals from family and friends who have purchased a home before. Then interview different agents and ask questions before you select the agent you feel is best suited to represent you.

 

Think about what you’re looking for in an agent and base your questions around that. Does the agent have references? Do they actively sell homes? This is an important one because if they do it means they’ll have a pulse on the current market conditions.

 

Ask how many clients they work with at one time. You need an agent that can work with your schedule and devote time to helping you. If they’re overwhelmed with clients that’s probably not the best fit. Do they practice dual agency? You want your own exclusive representation.

 

As a first-time home buyer, you need someone that can answer all of your questions in a timely manner. Don’t settle for just any agent, you deserve the best representation.
 


Pinpoint Locations and Neighborhoods

A big part of buying a home is to determine where you want to live. Location, location, location might sound cliché but, the old saying is spot on.

 

You can always change how your home looks but, you can’t change its location. Understanding how to pick a neighborhood you'll love is important. The location of a home impacts value and the ability to sell down the road; check out the guide to learn more about the importance of walkability, crime, and schools.

 

Type Of Home
Buying a home requires a decision on what type of property fits your lifestyle. Condo, townhouse, or single family are the most common options but, not always the only options depending on what area you’re in.

 

When deciding on a type of home think about how many people (if any) will be living there. Do you need or want a yard? Do you travel a lot and want a low maintenance property? Are you looking for amenities such as a pool or fitness center?

 

Asking yourself these types of questions will help you decide what type of property is best. Remember to think long term, not just about your immediate needs.
 


Know Your Numbers

Purchasing a home comes with costs that you might not be aware of. There are different fees that you’ll want to account for. Expenses will occur before you actually own the home such as home inspection costs and the appraisal fee.

 

Obtaining a mortgage comes with fees that will be a part of your closing costs. These are just a few of the costs that come with purchasing a home.

 

There will also be moving fees and expenses that come after buying a home including maintenance and utilities.

 

Knowing your numbers up front and planning for the long term will save you a lot of stress and keep your budget on track.

 

Closing Thoughts For Millennial Home Buyers

Buying a home is a big decision. It’s one that requires careful thought, planning, and patience. Take your time and do your research.

 

Assembling a trustworthy team of experts to guide you through every step and waiting to buy a home that you love will benefit you for years to come.

 

 

Counteroffer Mistakes In Real Estate

Counteroffer Mistakes In Real Estate

Many home buyers, especially first time buyers make counteroffer mistakes. Some believe a seller will always counter and others sit on a counter offer from the seller putting themselves in jeopardy of losing the house.

 

A counteroffer from a seller isn’t guaranteed. Depending on how long the home has been on the market, how many showings there have been, and the seller’s motivation to move they may or may not counter the offer a buyer submits.

 



Counteroffer Mistakes On New Listings

Homes that are new listings will rarely sell at less than list price. A home that sells within the first week of being on the market was priced at or below fair market value. The market speaks when homes are priced correctly! It’s a risky plan to try to negotiate thinking the seller is going to counter when the home is newly listed.

 

Counter offers are not guaranteed and even if the seller counters there’s another mistake buyers frequently overlook.

 

The Time It Takes To Process A Counter Offer

Time opens the opportunity for another buyer to tour the home and write an offer. It could very likely be a full price offer and even stronger financing or better terms.

 

→The listing agent and seller connect to talk about and analyze the offer
 

→Seller agrees to counter – the counter can be on price and terms
 

→The listing agent makes the changes and sends to the seller to sign, the seller may not check email until

    the next morning to sign
 

→The listing agent receives the signed counter, sends it to the buyer’s agent

 

→Buyer’s agent contacts the buyer to share the counter and discuss the changes. Buyer has to decide

    whether or not to accept the counter or counter back

 

→Buyer decides to accept

 

→Buyer’s agent sends the contract to the buyer to sign

 

But, wait – there’s a counteroffer mistake about to happen.
 


Before the buyer signs to accept the sellers counter the listing agent calls the buyer’s agent to share another offer has been received, it’s stronger, and the seller is withdrawing the counter.

 

Poof! There goes the house because too much time passed.

 

Every item above can take hours. The listing agent, seller, buyer agent, and buyer all have work and life happening while handling a counter. They don’t get finalized in the blink of an eye! Because of that emails may sit for an hour or two, phone tag can be played, and then there’s time to consider the counter terms. A day can easily pass before acceptance or counter are delivered back to the seller.

 

Why Is This A Counteroffer Mistake?

Because the odds of you being the only buyer in the marketplace or even the only buyer interested in the home are low. Non-existent in some markets. What you find appealing in a home probably isn’t drastically different for any other home buyer.

 

So, it’s another counter offer mistake to open the opportunity for the seller to have another buyer submit their offer.
 


Just because the seller countered doesn’t mean you’ve secured the house.

 

24 hours or more is very common when it comes to counter offers. That’s more than enough time for another buyer to write an offer. A strategy the first buyer overlooked because they were hoping to negotiate.

 

Buyers who are looking to save by offering less on a home don’t see that it’s a counteroffer mistake. There was never any savings to be gained if the seller had no intention of accepting a lower offer.

 

Even if the seller countered and was willing to accept a few thousand less it still opens the opportunity for another buyer to come in and secure the home.

 

Don’t be the buyer that makes a counteroffer mistake. Sellers don’t always counter the offer and even if the seller does you can still lose the house if it’s still being shown.

 

**These scenarios don’t apply to every market – market conditions matter. They do however apply directly to my market at the time this post was written