To Pre-Approve or Pre-Qualify or Proof of Funds; That Is The Question…

Here in sunny Southwest Florida, when a buyer gets ready to put an offer on a property, the seller (typically mentioned within the “confidential comments” of the MLS listing) requires it to accompany a pre-approval letter or proof of funds. If the buyer is a first-time buyer or doesn’t have this practice where they are relocating from, it can not only prove confusing, but slow down the bidding process; and possibly result in losing out on purchasing that property. That’s why a good real estate agent will discuss this with you first, not to be nosy, but to help you be as prepared as possible should you decide to place an offer on a property.

Once you understand the difference between Pre-Approval from Pre-Qualification from Proof of Funds, the concepts are straightforward. This article hopes to quickly clear up any confusions between the three concepts…

Pre-Qualification – A lender has evaluated your creditworthiness and determined that you probably will be eligible for a loan up to a certain amount. This is typically quickly analyzed and sent to the buyer via email for the purposes of looking at property and/or making a verbal offer. In some instances, a real estate agent may not work with buyers until they know what they qualify for when looking at properties within a certain price range.

Proof of Funds – A person or entity that has cash on hand to close is a cash buyer and will NOT be taking out a mortgage on the property. The cash needs to be liquid and readily available. In order for a cash buyer to prove they have the funds, they typically provide verification of funds via a document showing the:

  • date,
  • name of account holder, and
  • the balance of funds on deposit.

For the purposes of placing an offer, verification of funds is typically in the form of an official letterhead from the institution holding the cash, again, showing the date, name of account holder, and the funds available on deposit. This letter is turned in with the initial offer by the person’s real estate agent to verify to the seller that they have the funds needed to purchase the property.

Pre-Approval – This is the real deal, a statement from a lender that you qualify for a specific mortgage amount based on an underwriter’s review over all of a buyer’s financial information: credit report, pay stubs, salary, bank statement, assets, and obligations. The pre-approval letter is what the seller typical requires in accompanying an offer on a property. This “official” letter holds greater weight and proof, than a mere pre-qualification, that you can purchase a given property.

The biggest step towards success is knowing which one you need BEFORE you start looking for a property to purchase. Once you decide which you will need, be prepared with the proper paperwork to show when submitting an offer; this will help you look like a serious buyer and put you closer to hopefully closing the deal on the property of your choice.

Happy hunting!

 

Courtesy of thebalance.com and realtor.com.

10 “Did You Know?” Homebuying Details

In this article we take a look at 10 “did you know?” details about buying a home. If you want to know more or have questions about any of the information below please call or message me. I’m glad to help!…

#1 Getting Pre-Qualified/Pre-Approved     Pre-Qualified
It’s best to get pre-approved/pre-qualified even before you’ve found the dream home. Sellers want reassurance that you can buy the house. There’s nothing worse than finding your dream home, only to find out a month into the process you can’t afford it. Some sellers won’t even entertain an offer without a pre-approval letter! And remember, pre-qualification is NOT a guarantee.

#2 Pay Monthly Debt Timely     Debt Free
Even before you’re ready to house shop, pay your monthly debt in a timely manner. Whether it’s a student loan, credit card debt or even that monthly utility – nothing can negatively impact your credit score like a delinquency. Be timely consistently! A delinquency takes as much as 7 years to get off your credit report.

#3 You Don’t Have to Stress     Stress Free Zone
Home buying doesn’t have to be chaotic. Have a folder where all the items related to your search can be placed. Make a wish list divided into “Need” and “Want” to laser focus the type of house and amenities you want so you don’t settle.

#4 YOU Select Your Mortgage Company     Mortgage App
Interview at least 4 mortgage companies to find the one that will work for YOU. Know what you’re looking for in a loan – Conventional vs. FHA, fixed rate, 30yrs vs. 15yrs, etc. Once determined, get pre-approved and LOCK in a rate.

#5 Penny Pinching Goes a Long Way     Penny Pinching
As soon as possible – save, save, save towards that down payment on a house and the extra expenses after buying a house – setting up utilities, furnishings, etc. Find ways that work for you to save or earn more towards your goal – cutting out cable, eating out, a 2nd job, etc. This will keep you focused on your goal and ways to get you there quicker. Such as creating a budget and sticking to it.

#6 Timing is Everything, Don’t Hesitate     Clocks
Houses in SW Florida can go quickly, especially due to cash buyers and whether it’s peak or off-peak season. The median time on market for June was 56 days. While the best practice is to take your time as a house buyer, once you see the house you want, don’t hesitate. Especially once all ducks are in a row financially, it will go more smoothly and help insure you get the house you want.

#7 Don’t be Shy, Bargain     Bargain
When dealing with home price negotiations, tread lightly. Discuss with your Realtor negotiating tactics and gather all information. This process can be a back and forth battle of wills. Here are a few tips to help your bargain effort:

  • Go into purchase negotiations primed with as much information as you can gather
  • Don’t lowball. The seller wants to know you’re serious
  • Keep a poker face and remain calm
  • Know when to walk away
  • Know when to throw in the towel and accept a price

#8 Consider Life After You Buy     Cash House
The excitement of buying a home can blind the homebuyer to the true expenses of home ownership. Before going into a mortgage, fully understand the terms and break down of what your monthly payment will be and include:

  • Principal
  • Interest
  • Taxes
  • Insurance

Just because you’re qualified for a certain amount, may not mean you want that monthly payment once all the fees, principal and interest are added into it. Make sure your comfortable with the bottom-line monthly payment!

#9 Consider Life After You Buy (cont.)     Moving
Part of the excitement of homeownership can easily overlook expenses needed to move in and set up the home. Don’t forget to factor in (i.e. save towards):

  • Moving expenses
  • Setting up utilities
  • Top priority fixes/buys (if needed)
  • window treatments, needed furnishings, lawn mower/lawn service, and/or stocking the fridge.

#10 Fly Under the Radar     Save Money
Stay off the radar when waiting for a loan to come through (up to the closing). Here’s a few simple ways to stay out of sight:

  • Don’t make any large purchases
  • Don’t apply for any new credit accounts
  • Don’t close any credit accounts
  • Don’t move your money around
  • Don’t skip or miss payments

BONUS TIP:  #11 Ask a Lot of Questions     Questions
Buying a home is a significant purchase that could potentially last you years. So don’t be afraid to ask questions till you become comfortable with the answer. And don’t feel like you’re ever bugging your real estate agent, that’s what they earn commission for – to be there for YOU!

 

Courtesy of Blue Water Mortgage Corporation

Why Hire a Realtor®?

Are you considering buying or selling your house on your own? There might be more to it then you think. Hire a Realtor® to make it easier on you.

Thinking about buying or selling your home on your own? The option may seem appealing to save yourself commission rates, but are you considering EVERYTHING that goes into the process? As the infographic below shows, it’s more than just spending hours touring homes or holding open houses.

29 Ways It Pays to Work with a Realtor

Let a licensed real estate agent, and better yet, a realtor® take the extra steps to save you time and worry throughout the lengthy process to buy or sell a home. A realtor® is held to a higher level of excellence to not only provide fair and ethical customer service to meet your real estate needs; a really good one will go the extra mile to educate you throughout every step with your best interests in mind.

Even as this brief video shows below, there are details like setting up title or completing a survey that can easy overwhelm a seller/buyer beyond the basics of staging a home to sell quickly. A good realtor® also has access to additional resources that provides a house to be seen by several hundreds and possibly thousands of people than the typical unlicensed person has access to.

“Sticky Notes” Hire a Realtor

Let me take the worry out of buying or selling your home so you can enjoy the process of moving onto an exciting new phase of your home ownership lifestyle. You won’t be disappointed!

 

* Infographic and video courtesy of Florida Realtors Magazine.