Right now the Las Vegas market is experiencing record LOW inventory. One side affect of this market condition that has received a lot of press, is how difficult it can be for a Buyer that is obtaining a new loan to get his or her offer accepted. With low inventory there is a “mad rush” of buyers and offers whenever a good listing “pops up.” Many of those offers come from cash buyers who don’t have to deal with qualifying for a loan, worry about appraisals, and are not at the mercy of lenders telling them how long it will take to process a loan. However, there are a good number of buyers that require financing and cannot pay cash, especially first time buyers. So how do you compete? Well for those in this situation, all is not lost!
As you begin searching for your dream home the single most important thing you can do is to hook up with a reputable mortgage lender and begin the process of qualifying for a loan…right away! Why? Your ability to obtain a loan and knowing the maximum sales price you can qualify for is the most critical step you can take to make your dream home a reality. Yet, I often see Buyers put this critical step off till they find a home! Having your lender provide you with a pre-qualification letter is a good idea so you have an idea of the price range to begin looking at. However, as soon as you are seriously looking for a home, it is important to go a step further and get a pre-approval letter. This will save you time and can easily make the difference between a successful offer vs. losing out to a better “packaged buyer” in the event of multiple offers. Having a pre-approval letter is one of the best way to distinguish you from the other buyers making offers on a home.
When you are pre-approved for a mortgage, it means that your lender has looked closely at your credit report, received a copy of your last two years tax returns, reviewed your pay check stubs and income and reviewed all your existing debts. This is done in order to determine the dollar amount of the loan you will be able to obtain and what type of a loan that you qualify for. A good lender will guide you to the most advantageous loan that suits your needs, tell you the maximum amount you are eligible for and discuss the current interest rates that are available to you. Pre-approval letters are formal agreements between the buyer and lending institution that offer a guarantee of loan approval for a specific amount of money. The financial institution issuing such a letter may or may not charge for this service ( a credit check is needed). Keep in mind that even with a pre-approval letter, your bank could deny your loan under certain circumstances. Why? Two good examples: a) the buyer that makes an offer on a home and upon acceptance, goes out and finances a new car; thus taking on a large debt not disclosed to his lender when his loan application was made; and b) the property you are purchasing must qualify for the loan; if the appraised value of the property is significantly less than the sales price, you will not be able to obtain the loan you originally asked for.
Pre-qualification letters are different from pre-approval letters in that they do not include an analysis of your credit report or your true ability to purchase a home. All a pre-qualification letter tells the listing agent considering your offer is that someone has taken a superficial look at your income and expenses. My experience has taught me that a pre-qualification letter can be issued with nothing more than a phone call between a potential buyer and their lender ..no verification whatsoever! These letters will typically have a long shopping list of “conditions” that the buyer must meet to qualify for a loan. Let’s face it, if I have 10 offers on one of my listings and I receive one of these; how much weight do you suppose I’ll give that candidate in the total consideration?
So let’s get back to multiple offers… Last week I received 14 offers on a property within 4 days. Only one was cash! The remaining offers were buyers obtaining some kind of financing. Some had no letters of qualification at all. Two had great letters, and provided me a recent bank statement showing the buyer had sufficient funds to close and those two offers included a sensible earnest money deposit. If you were representing the sellers best interest, which of the 14 would you have considered first? Oh…the cash buyer….he was the lowest of the 14! “Packaging” yourself in a manner that puts the best possible light on your ability to perform will lead to real results.
For more information on this topic as it may concern your needs, please give call George Durkin at 702-595-5688.