Why Prequalification is Essential in a Hot Market
Everyone has likely heard it by now — the Phoenix real estate market is on fire! And while this can be an exciting time to be buying or selling a home, it’s important to take the proper steps to ensure the entire transaction, whether on the buying or selling side, goes smoothly. Here, the Libertas Real Estate experts explain why prequalification is so important during a hot market.
First, let’s be clear. Prequalification is essential in any real estate transaction. First-time homebuyers may be wondering — what does this actually mean? It’s simple — a prequalification is an estimate (from a lender such as a bank) of the amount a homeowner might be able to borrow. This number is based on the potential homebuyer’s financial status and will likely involve a credit check. During the prequalification, lenders can look into every detail of a homebuyer’s past financial history, so full disclosure is important.
Getting prequalified can help future homebuyers better determine their home buying price range, estimate a monthly mortgage and also help them understand their mortgage options. Beyond getting prequalification, mortgage preapproval is another step towards homeownership.
Being preapproved for a mortgage is taking the prequalification process even further — and is a great move for serious homebuyers. Preapproval means that the homebuyer has completed a mortgage application through a lender and that the lender has performed a credit check and has offered (in the form of a preapproval letter) to lend a specified amount. This offer generally has a time limit of about three months.
However, in a hot market, this proves to sellers to that the buyer is serious when they make an offer and also provides the security that the buyer will have the funds to see the purchase through. This is another key point for home sellers in this market, since many offers that come in can sometimes back out or fall through for one reason or another.
When the real estate market isn’t as hot, and homes aren’t ending up in bidding wars as soon as they hit the market, prequalification and preapprovals are still important. However, they are crucial in a hot market when homes are going fast. Sellers’ agents see a prequalification or preapproval as a signal that the buyer is serious and ready to go.
Applying for preapproval can generally be done online with one’s bank or preferred lender. A trusted real estate agent can also suggest a reputable lender. The application process can be done almost entirely online, and, in many cases, a potential homebuyer can receive results in a matter of hours.
Homebuyers looking to obtain prequalification may be asked to provide information such as proof of income and bank account information, past tax returns, and they will need to agree to a credit check. Potential homebuyers can also disclose how much they can provide for a down payment and the approximate mortgage amount they are seeking.
So when looking into buying a home, meet with a lender to get preapproved… and then come see your trusted Libertas Real Estate agent!