Pre-approval sweetens deals

Real Estate Weekly, Dec 1, 2004 by Melissa Cohn

Getting pre-qualified is the first step in the mortgage process--it's important to know in advance if you "qualify" for a mortgage and if you do, just how much home you can afford based on your income and personal needs. In the pre-qualification process, you tell your lender or mortgage broker about your income, debts, employment, rental history, what shape you think your credit is in and the amount of cash available for the downpayment and closing costs--and then a pre-qualification letter is drafted if the monthly payment on the new home is below a certain % of your gross income and total debts. But that's it--becoming pre-qualified just states that you can afford the mortgage payment. If you're really serious about purchasing a property, however, that pre-qualification letter means very little. Many top-producing real estate brokers with reputations to protect won't even accept your offer based on a pre-qualification letter. They don't want to take a chance on a buyer who may not ultimately qualify for an actual loan. So you need to take the next step and get pre-approved before you even start shopping for a home. During the pre-approval process, all the information that you provided is verified--and your credit report is run and reviewed.

Having that pre-approval letter in hand speeds up the entire homebuying process. You can shop with confidence and peace of mind, knowing that nothing in your application will blindside you and your broker can search for properties on your behalfreassured that you've already been approved for financing. Even the seller benefits knowing that you've already applied and been approved for a mortgage. A preapproval letter essentially makes you a cash buyer--and can definitely sweeten your offer!

MELISSA COHN PRESIDENT AND CEO MANHATTAN MORTGAGE COMPANY