The Importance of Pre-Approval of Financing

If you are serious about buying Springfield, Illinois real estate, you should consider getting pre-approved for financing before you start home shopping.  Rarely is it the case that homeowners buy their home outright, in cash.  We at Fulgenzi and Company know that greater than 99% of all homebuyers finance their purchase, since very few people have the kind of cash on hand that it takes to buy a home.  There is a bit of paperwork involved in getting pre-approved for a home loan, but it is well worth the effort because:

• Pre-approval letters are optimal to pre-qualifying letters.  It is somewhat easy to get a letter of pre-qualification.  This typically just involves calling up a lender and providing them with some minimal financial information, and then having a letter faxed or sent to you via email.  A pre-approval letter takes more time and you must disclose more information, but the pre-approval letter carries a lot more weight than just a pre-qualification letter.  This positions you as a serious homebuyer who is ready to buy, not just a dreamer who is hoping to be able to buy! 

• Getting pre-approved gives you a dollar figure to work with.  When you get pre-approved, then you will have a general ideal of just how much you are qualified to borrow.  Knowing your price range makes it easier to rule out certain homes that might be above your pre-approval amount.  It is nearly impossible to determine this beforehand, since the amount that you will be able to borrow depends on a number of factors, including your credit history, your existing debts, and your debt to income ratio. 

• Pre-approval gives you leverage when negotiating with the seller of the home you are interested in. As a rule of thumb, sellers prefer to negotiate with a buyer who has been pre-approved, since they have the reassurance that the buyer is qualified financially to obtain financing if they choose to buy the home.  The pre-approval letter can make all the difference when there are close multiple offers.  Moreover, buyers feel more confident making an offer when they have a pre-approval letter since they know for sure that they are able to obtain financing. 

• Real estate agents work harder for you if you are pre-approved.  Let's face it. Real estate agents make money by selling houses, and it is easier to sell a house is the buyer is approved for financing. It only makes sense that a realtor will put in more time working on a sale for a pre-approved buyer because the buyer has shown himself or herself to be a serious buyer.  Simply put, a Springfield, Illinois real estate agent is more likely to make a commission on a pre-approved buyer because these buyers tend to buy.  Many agents don't even have the time to show houses to buyers who don't have a letter or pre-approval. 

So while the pre-approval letter that you get from your lender is not binding for either party (you nor the bank), it is a great tool to have in-hand if you're looking to buy a home.  The mortgage would still be subject to the home's appraisal, possibly a home inspection, and any changes that might occur in your financial situation before the purchase.  If you have any questions about getting pre-approved for home financing, or homes for sale in Springfield, IL contact your lender or your local Springfield, Illinois real estate agent.