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prequalification process - the activity that enables the
buyer to get a letter or certificate from a lender,
stating within reasonable limits that the buyer is
qualified to purchase a property up to a given price, as
long as certain minimums are met - might seem to some
folks to be a waste of time. I can assure you that it is
not.
Often, especially in a
very competitive market, two or more buyers might be
vying for the same property at the same time. I have
seen market conditions such that homes have sold within
minutes of coming on the market - often at or above the
asking price! It makes sense, then, to make yourself as
attractive as possible to the seller of a house you
might want to purchase. One tool to get a "leg up" on
other buyers is the prequalification.
But, what is
prequalification? This might seem like a silly question,
but many folks have a mistaken idea of the
prequalification process. Simply stated,
prequalification indicates that you are serious enough
to have gone to a lender, armed with some minimal
documentation establishing income, and have filled out
enough of an application for the loan agent to make a
considered opinion about your purchase-ability.
Prequalification is NOT
a full loan application and approval. You cannot use the
prequalification letter as evidence that you have an
approved loan, as the process for full approval requires
many things not included in the prequalification process
- such as:
- Full Credit Report
- Substantiation of
Income
- An appraised
property that you will purchase
- A purchase contract
- An executed loan
application - in full
- Authorization to
allow the lender to request your IRS documents
- Much more - given
each individual situation
Often, however, the
seller and/or the listing broker will look more
favorably upon a buyer who has taken the first step -
attainment of the prequalification letter or
certificate. Let's face it. . . purchasing a home can be
an emotional experience. Getting shut out of a purchase
by another buyer can make it even more emotional, and
can cost you a great deal. Take every step possible to
be the most attractive buyer that you can be.
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