Using Mortgage Preapproval to Increase Your Negotiating Power Over the Sales Price

Written by: Mike Valles

Finding a home that you want to buy, still means that you may be working against other potential home buyers for the same house. It only makes sense that the one that can get the money first, as well as have the best offer, is going to end up with the house. A mortgage preapproval can give you the edge you need to be in the winning position.

A mortgage preapproval is much better than a mere pre-qualification for a mortgage, which used to be all that was needed. Now, however, you need to go a step further.

The New York Times says that a mortgage pre-qualification is simply an approval of the bank saying that your paperwork looks good. However, they are only looking at what you gave them – no research is actually being performed yet. In other words, it’s still not a guarantee that you will actually be able to get the mortgage – or the house. You’ve probably heard many stories about people who thought they had the mortgage in their pocket, and then have it fall through when they actually tried to obtain it. This can be very disappointing to a seller, as well as to the potential buyer.

When you go to get a pre-approved mortgage, you will have to provide everything needed for an actual mortgage. This will include documentation proving your income (W-2′s and 1099′s), tax returns for two years, interest and dividend income records, paystubs, bank statements, and more. MyFico lists many of the documents you would need in order to qualify for a mortgage.

By obtaining a mortgage preapproval first, you will already know the limits of how much you can borrow, says SmartMoney. This eliminates any guesswork. Even more importantly is that it makes a seller much more interested in talking to you. With this document in hand, a person with only a prequalification won’t stand much of a chance. Even real estate agents will know that you are serious about buying a home, and will be willing to work harder with you and for you.

The Home Buying Institute mentions that a pre-approval is still not an actual mortgage. Nor is it a guarantee that the lending agency will actually give you one. All of this is contingent upon further details, such as whether or not anything about your income or credit score changed, indebtedness, and the worthiness of the house and selling price.

The process of starting to give you a mortgage will take place only when you provide the seller with an actual offer. When you do that, then you will also give the lender a copy of that document. Afterwards, it will take about 30 days to give you an approval or denial.

Before you get serious about choosing a lender to get a mortgage from, you should get several quotes first and then compare. Interest rates will vary from one lender to another, and so will the terms you might get. Finding a lender to get your mortgage preapproval from is just as important as getting the actual mortgage and the process should only be started after doing your homework.


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Using Mortgage Preapproval to Increase Your...

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