Texas Mortgage Refinance

The market today is definitely a buyer’s dream.  Currently, there are more homes on the market for sell than there are buyers.  For the buyer, this means having tons of opportunities, being able to be a little more particular about the home to buy.  However, regardless of the market situation, one of the best things a buyer can do is get a loan approval.

Typically, a person would shop with a real estate agent to find a home in which they are interested.  After careful negotiation, the offer price is accepted, after which time the buyer goes to the lender to get the loan.  While this is certainly one way of doing things, it also comes with some disadvantages.  For one thing, until the paperwork is complete, if another buyer with cash or someone who has been approved comes along, the seller would likely take their offer over yours.  The reason – there is less hassle and closing would be much quicker.

Another option that some buyers choose is to become prequalified.  This is an excellent solution but not as good as an actual loan preapproval.  Regardless, with prequalification, the buyer would visit a lender prior to making an offer on a home.  To the seller, this shows that the buyer has everything in order to get approved.  Obviously, this makes the buyer’s offer a little more appealing, giving the seller more confidence that the offer will go through.

However, if you want to go all out and set yourself up for complete success in the buyer’s world, you want to get a loan preapproval.  This is slightly different from a prequalification in that rather than just being told that you would likely qualify once you complete the loan process, you actually get approved.  In other words, you go through the loan process before putting an offer down on a home so the money is sitting in an account just waiting to be used.

Now, with a loan preapproval, you would typically have a set amount of time in which the money can be used.  However, during this period, you have a lot of buying power.  Again, because the seller knows that you already have loan preapproval, they would be more likely to come down a little on price.  Obviously, a loan preapproval is advantageous to the seller and to the buyer.

Look at a loan preapproval this way.  You would meet with your lender and get the funding for a home.  From there, you would be able to shop around to find the perfect home.  Let us say the home you want to buy is $300,000.  If the seller is approached by someone who is not preapproved, chances are the seller is going to stick very close to that asking price because he or she is not even sure if the sale will go through.

On the other hand, if another buyer who has a loan preapproval were to approach and show interest, the seller might come down on price because he or she knows it’s a done deal once the offer is accepted.  This means if you were the approved buyer, you might be able to place an offer of $275,000 and if the seller is motivated, the offer could easily be accepted.  Remember, with this being a buyer’s market, sellers have tight competition.  Therefore, if they get an offer from an approved buyer, they are going to be far more flexible than with someone who is only prequalified or someone who has not even started the loan process at all.

The great thing is that a loan preapproval process is actually simple.  In fact, many people can complete the process in less than 30 minutes.  For some lenders, the process can be handled via email or over the phone, making it extremely simple and convenient.  However, the lender is going to require specific information, which would include your current credit, debt-to-income ratio, and your employment.

Then, once the lender gets the required information, he or she would determine an estimate for the maximum loan that you would be able to get.  At this time, the lender would also be able to tell you the approximate amount of your monthly payment.  Keep in mind, with a loan preapproval, even if you are approved for a maximum mortgage loan of $400,000, you do not have to spend that much, the decision is yours.  This simply means you can make an offer up to that amount.

In some cases, your real estate agent may obtain a copy of the loan preapproval to show the seller, which again puts you in a much better position for negotiations.  By getting a loan preapproval, you know the exact amount you can spend on a home, your monthly payment, the amount of interest being charged, and even the extent of the closing costs.  For the seller, a loan preapproval provides much better confidence and assurance that the deal is solid.