Many home buyers go about the process of buying a home the wrong way. That is; they spend weeks, months and sometimes even years, searching real estate listings, driving neighborhoods and visiting open houses looking for the perfect home to buy. Surely, that is the logical thing to do? Isn’t it? After all, the buyer gets to know what houses are available and which properties are for sale at a fair market price. Yes, that it right to an extent. Unfortunately, that is not usually the best way to go about buying a property.
Once the buyer has found the home of their dreams, they place an offer to purchase the property subject to obtaining a suitable home loan. That is where things can come horribly unstuck.
It is often only at this point, the home seeker begins to shop for a home loan. All too frequently; the bank, or lending institution, declines the home loan application. For one reason, or another, the property falls outside the lending criteria and is deemed to cost more than the buyer can afford.
In these circumstances the buyer loses the chance to buy the dream home they searched so hard to find. The deal falls through simply because the buyer could not obtain a loan and finance the purchase. The buyer is frustrated, the seller is frustrated and so is the inexperienced real estate agent who chauffeured the buyer around for all those months without asking the one important question – “have you been preapproved for a home loan, or are you paying cash?”
If you require finance to purchase a property – always get preapproved for home loan finance, BEFORE searching for the home.
The savvy home buyer is the one who shops around for the loan finance first. That way, he or she knows exactly how much he or she can (or can not) afford. The home buyer can then confidently seek out only properties that are within his or her prequalified loan price range.
The only sure way of knowing how much you can borrow is to go through the home loan prequalification process. Home loan prequalification is not difficult, and if you are not a cash buyer, it is an essential part of the whole home buying process.
Home loan prequalification sets the wheels in motion and is the first step in formally applying for a loan. It lets the home buyer know what is and is not possible.
The other big advantage in prequalifying for a loan is that it puts the buyer in a much stronger negotiating position with the vendor. The fewer conditions of sale that are included in the contract the better.