Almost every homebuyer has been told at some point that they should be prequalified for a loan, but too many ignore that advice. The major reason they disregard the advice is that they don't understand the reasons for prequalification.
There are a number of advantages that a prequalified buyer enjoys. Here are just a few of them:
- Better service from brokers
- More realistic price range
- More negotiating power with sellers
- Peace of mind
Better Service from Brokers
Imagine this: it's Saturday morning, prime selling time for real estate brokers. You're a broker, and you have two clients who are interested in looking at houses today. One client has been prequalified by a lender you know and trust, so you are sure the buyer can afford the homes you're showing. You have some doubts about the other buyer. He seems a little shady. Although he claims he can afford the houses, he doesn't dress like it. His car is older, and you just can't be sure if he is wasting your time or not. Maybe he's one of those people who just enjoy looking at other people's houses.
Which buyer are you going to choose to work with today? The answer, of course, is the prequalified buyer. As a broker, you need to maximize your time. You'll go for the sure thing, every time. You may still work with the "shady" buyer, but you'll schedule him for an evening during the week. You may also show him 4 or 5 houses before giving up, instead of the 18 houses you show to a qualified buyer.
More Realistic Price Range
Have you ever fallen in love with a house, only to discover, to your shock, that you couldn't afford it? It's happened to almost everyone at some point. But, this heartbreak can be prevented with a prequalification.
Prequalification also prevents the opposite problem. Some homebuyers seriously overestimate the monthly mortgage payments. That means they may be looking at houses in the $300,000 range when they can actually afford a house up to $450,000. Essentially, these buyers are cheating themselves - and their families. When you are prequalified for a loan, you'll have objective information to base your decisions on.
But the biggest reason you should be prequalified for a mortgage is the peace of mind that it brings. If you're not prequalified, every time you look at a house you'll be wondering, "Could I really afford this? Will my loan be approved" When you're prequalified for a loan, you'll be able to focus on finding the best house for your money. And, that's the best reason to be prequalified.
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