today offer a service that is referred to as a preapproval. Unlike the typical
mortgage loan approval, this service is provided to a buyer before he or she agrees
to purchase a certain property. An abbreviated application is taken, and the lender
provides a document stating the amount of money that the buyer will be able to
borrow when making a home purchase. The pre-approval also states that it is conditional
pending the appraisal of the actual property being purchased and written proof
of the buyer’s employment and income. Here are the benefits to both the
buyer and seller.
BUYER’S BENEFITS: With a pre-approval, the buyer knows
what price range he or she can and cannot afford. This knowledge in advance prevents
a person from falling in love with a home that is not within his or her financial
grasp. After looking at more expensive houses, it can be a real disappointment
to begin looking at lesser properties that are affordable. The pre-approval allows
the buyer to begin in and stay in the correct price range when shopping.
SELLER’S BENEFITS: Whenever an offer is made, it is usually dependent
upon the buyer obtaining the necessary loan amount from a lender in order to complete
the purchase. It may take a few weeks or a month to find out if the buyer has
been approved. During this time, the house is off the market and not available
to other would-be buyers. If the buyer is unable to qualify for adequate financing,
the seller loses the time that the house was off the market and must begin again
to attract another buyer. If the buyer has been pre-approved, however, the seller
knows that this is a buyer who is indeed capable of completing the purchase.
ADVICE: Ask your Realtor to help you obtain a pre-approval.