As a buyer, it is wise to get pre-qualified before you go out looking for a home. There are many reasons, but the most important reasons are that it benefits you, your agent, and the seller.
First, the most important beneficiary, of course, is you. The mortgage pre-qualification step is a relatively simple one, but it is an important one. It begins the process of formally applying for a mortgage, and it gives everyone involved–especially you–a clear sense of the direction they should be headed. When the lender pulls your credit report, he will verify that there are no outstanding issues that you need to take care of before you buy. Even paying off a small debt can make a difference in your credit score and the mortgage rate you get.
Second, it benefits your agent, because by knowing what your financial parameters are, we can spend more time looking for houses that “fit” and less time pursuing dead ends. As an example, no matter how much you might want a home for $100,000, if your qualifications say $90,000, your qualifications say $90,000. When it comes to mortgages, “yes, but” doesn’t carry much weight!
Third, it gives you more bargaining power. Look at it from the seller’s perspective. If you had 2 offers on the table for your house, one from a fully pre-qualified buyer and the other from an “I’ll get around to that soon” buyer–to which offer would you devote the most attention? Even if the pre-qualified buyer’s offer was $1000 less, would you take the chance on the buyer that perhaps may not be qualified? When it comes to a seller evaluating offers, “a bird in the hand…” definitely applies.
And the final reason, it makes the process go more smoothly.
Article written with Todd Franks – Mortgage Banker at Bank of Texas.
