Pre-qualified or Pre-approved for a home loan? There IS a difference!

Whether you are a home buyer or a home seller, you must have heard those two terms many times. Real estate agents sometimes use those two terms interchangeably, and they ARE NOT THE SAME! There's a world of difference between the two! The number of steps, and the amount of effort between the two vary greatly, and the one you choose to pursue can make every difference in the world as it pertains to your transaction.


Here's why one is better than the other-

Getting pre-qualified can be as easy as making a 10 minute phone call. It's certainly a good idea, and it's actually a first step towards pre-approval. The only things you need to do to obtain a pre-qualification is to call your lender or mortgage broker, tell them your income, how much downpayment you have, and what kind of debt you have. They will take those figures and calculate an approximate purchase price based on the inofrmation that you have given them, taking into account the current interest rates, and how good you feel your credit is. Your representative may not always request or run a credit report before he/she gives you a price range.

A pre-approval, on the other hand is much more detailed.  You'll submit tax returns, allow the lender to obtain a credit report, and fill out an actual mortgage application. You can do this even if you do not have a property in mind. When you locate a property, most of the submission process has already been completed, and the lender only awaits property specific details, such as a contract of sale, annual taxes, property condition, and an appraisal for the  house. 

The bottom line: If you are a seller, and you have two offers in front of you at the same price, and you are trying to decide which one to take, unless there is some type of extenuating circumstance, I would work with the pre-approved buyer. It makes better sense- a pre-approved buyer is a better prospect than a pre-qualified buyer for reasons stated above. If you are a buyer, go ahead and get prequalified NOW, if you are out looking at homes, and haven't already done so.  Once you are prequalified, begin the pre-approval process so you don't get into a situation where a buyer looks better than you do "on paper"because they have completed additional legwork.





Homebuyer Tip #1 from The CT Home Blog. What do you do when...

What do you do when you go see a home and the seller is there during your visit?

Plainly put? You can say three things to the seller: Hello, thank you, and goodbye.  NOTHING ELSE! I  learned something very valuable a number of years ago that I would like to share with you. You can COST yourself a lot of money by talking to the seller. I hate to say it, but it's true. The only time you should ever compliment a homeowner on their property during a showing,  is  if you are not interested in buying the property.

Go on and on about how nice the home is to the seller, and put in an offer? NOT A GOOD IDEA! Smart sellers will not negotiate as much, because they know they don't have to. We were all taught that it's very polite to give an honest compliment, and I believe you should in almost every instance, EXCEPT when you are buying your  home. If you want to tell the seller how much you love their home AFTER we've negotiated, that's fine. It doesn't cost you any money at that point.

I always advise my buyer clients to not even ask questions of the seller during the showing. Tell me what you want to know, and I will ask. The fine art of obtaining basic information from a seller in a conversational way is best. So leave the questions to your real estate agent, (That's me!)  and you very well may be  saving yourself thousands of dollars!

How long does it take to actually close on a home?

If you have been trying to decide what to do, as far as buying a new home,or selling your existing one, here are some ways to see whether the timing is a good decision for you to start the process right now.

For example, if you would like to move around the end of June when the school year is done, and we leave just 60 days to negotiate a sale, we better get started right away! It takes 45 to 60 days to close, and  we need some time on the market to attract that buyer. Now what happens if a buyer comes along and wants to close sooner than that? We'll cross that bridge when we get there. Many buyers will wait an extra 45-60 days if they really want to buy your home, so let's not worry about that right now.

Sellers:
Get an idea as to what your home is worth. A  Market Analysis from me doesn't cost you a cent, and I certainly don't mind coming out to your home whenever it's convenient for you. Rest assured that I am not a fan of high-pressure sales tactics, so you can cross that off your list of concerns about having me over. I'll give you a true idea as to what your home is worth, and the time frame needed to secure a sale. From there, the next step is to figure out what which town you want to move to, if you don't already have an idea. I'll set you up with free access to the MLS, and we'll go look at a few homes to make sure that there is a home available that fits your needs and budget. If we find lots of properties that seem to fit the bill, well, then depending on your time frame for moving, we might want to get started right away, or plan for a future start date.

Buyers:  Let's work on an  estimated time frame. Let's say for instance, that we went to see a home today, and you wanted to buy it. If we found that property today, the very soonest that we would most likely close is at the end of March, but if you figured on finalizing the sale at the end of April, that would be a lot more realistic. And that's if we found a house today! We haven't even met yet! You should expect the closing to take anywhere from 45 to 60 days on average, and if you are looking at bank owned properties, the closing could take months! So depending on your time frame, it might be a very good idea to start the process now.

If you want to see what your competition is , or see what available homes are out there in your range, just click on the logo below to get your FREE, no obligation MLS account, complete with addresses. Remember you can always call me or email me, too. 

Make sure you check all of the fees for your loan!

I usually do a rate check on Monday and Friday mornings, but I decided to check them today and  give you an update. Generally, you see interest rates that range from bank to bank, and from credit score to property, etc., but one very important item  remains wherever and whenever you look. By the way, today's rates can vary anywhere from about 3.75% for a 15 year loan  to 4.75% for a 30 year fixed rate  loan. Another  variable to that  is the fees, and all the fees produce your APR (Annual Percentage Rate) That's why you can look at an annual interest rate and see that the APR is  higher. That means that the rate actually ends up being more with all the fees associated with that loan. The bank will take points, for example, (and other up front fees) , which in effect reduce the amount of the actual loan, although the payment stays the same. When that is done, the new rate reflects the same payment spread out over the term of the loan, which is why the APR can be higher.

Here is a link to an online banking resource for your own overview of the rates.