pre approved vs pre qualifed – The Real Estate Beat

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You may have been told that it’s important to get pre-approved at the beginning of the homebuying process, but what does that really mean, and why is it so important? Especially in today’s market, with rising buyer competition, it’s crucial to have a clear understanding of your budget so you stand out to sellers as a serious homebuyer.

Being intentional and competitive are musts when buying a home right now. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows sellers you’re a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.

With limited housing inventory, there are many more buyers active in the market than there are sellers, and that’s creating some serious competition. According to the National Association of Realtors (NAR), homes are receiving an average of 5.1 offers for sellers to consider. As a result, bidding wars are more and more common. Pre-approval gives you an advantage if you get into a multiple-offer scenario, and these days, it’s likely you will. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war.

Freddie Mac explains:

“By having a pre-approval letter from your lender, you’re telling the seller that you’re a serious buyer, and you’ve been pre-approved for a mortgage by your lender for a specific dollar amount. In a true bidding war, your offer will likely get dropped if you don’t already have one.”

Every step you can take to gain an advantage as a buyer is crucial when today’s market is constantly changing. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals such as a loan officer and a trusted real estate agent making sure you take the right steps and can show your qualifications as a buyer when you find a home to purchase.

Bottom Line

In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. Not only does being pre-approved bring clarity to your homebuying budget, but it shows sellers how serious you are about purchasing a home.

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As a full time, professional Realtor it is important that I guide my clients as best I can. Even if it means not showing one single home until a buyer is fully, pre-approved. I know this sounds very regimented, however in the San Francisco Bay Area Real Estate market – a buyer needs to present their very best if they want to compete.

There’s been a bit of confusion on what it means to be “pre-qualified” versus “pre-approved” by a mortgage lender. To the average Joe – isn’t a phone conversation just as good as a letter? In one word – NO! It’s important to know the difference because it can have a major impact on your real estate transaction. Here in our market – it is the difference between having your offer presented in its best light – or having your offer outright rejected by the seller.

Here’s what you need to know:

Pre-qualified means the buyer hasn’t yet been vetted by a third-party credit institution. The underwriter, or he who makes the decision, hasn’t even seen the file. Because their credit and documents haven’t actually been verified, a letter of pre qualification is the result of a conversation with a lender. Nothing more. That isn’t to say a talk with your mortgage broker about options is a bad thing. It’s actually a buyers very first step. It’s just that when it comes to your transaction, it carries little weight. An offer with a pre-qualified letter will not gain any light in todays competitive market. No seller needs to grant a buyer time to get their loan pre-approved. Not when a buyer is one of several offers and the seller will pick the very best, buttoned down one.

That said, a pre-approval letter is truly valuable! In fact in our San Francisco Bay Area Market – a letter of commitment is becoming the new pre-approval letter. Both the buyer’s credit (and documents) have been verified by a reputable third party and accepted by the lender. Meaning, the underwriter has seen the buyers credit report, reviewed all their supporting documents, called the employer to verify employment and is ready to order an appraisal once the buyer is in contract. Ideal buyers are pre-approved – and in a hot market like ours, it makes a difference. Sellers want pre-approved buyers. Period. In fact, The Caton Team will not show property to anyone until they have been pre-approved with a lender. Our market moves fast, very fast. Homes are sold within two weeks or less. And often times, when a buyer finds a home they like, the offer date is usually just days away. So having the buyer, fully pre-approved puts them in a position of best competition. They buyers knows the loan they are getting, the payment to expect and are comfortable moving forward at a quick pace.

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Tag: pre approved vs pre qualifed

Pre-Approval Makes All the Difference When Buying a Home – Shared Article

Bottom Line

Got Questions? The Caton Team is here to help.

Berkshire Hathaway HomeServices – Drysdale Properties

Bottom Line

Got Questions? The Caton Team is here to help.

Berkshire Hathaway HomeServices – Drysdale Properties

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