Most homebuyers 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. Now I hear what you are saying. Surely, that is the logical
thing to do? Isn't it? After all, the buyer gets to know what's
available and which properties are for sale at a fair market price.
Unfortunately, that is not usually the best way to go about things.
Now don't get me wrong... property searching
does provide useful and essential research. The trouble is; doing
that first, can mean doing things back to front. Why? Because,
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's
where things can come unstuck...
It’s often only at this point, that they
begin to shop for a home
loan. All too frequently, the bank or lending institution
declines the home
loan application. The property falls outside the lending criteria
and is deemed to cost more than the buyer can afford. The buyer
therefore loses the chance to buy the dream home they searched
so hard to find. The deal falls through simply because the buyer
couldn't finance the purchase. The buyer is frustrated, the seller
is frustrated and so is the inexperienced agent who chauffeured
the buyer around for all those months.
Get the order right: Hunt the loan before the
The savvy buyer is the one who shops around for
the home loan first.
That way, he or she knows exactly how much they can (or can't)
afford. The buyer can then confidently seek out only properties
that are within their prequalified home
loan price range.
The big advantage in prequalifying for a home
loan is that it puts the buyer in a much stronger negotiating
position. The fewer conditions of sale that are included in the
contract the better.
The seller is likely to take a buyer with a secured
a home loan commitment
far more seriously, than they will a buyer who may need to have
a home loan approved.
There are two methods of applying for a pre approved
home loan. The standard way
is to supply a home loan agent
with your financial and credit history. The home
loan agent will then "crunch the numbers" and "run
the ratios" to calculate the level of borrowing that can
be approved. A major flaw in this scenario is that the borrowers
often forget to reveal all. They (conveniently) forget to tell
about their 4 overdue credit card payments, their new car payment
or they push their income figures beyond reality.
The preferred method is to first complete an
application and provide income and employment records. The home
loan agent would then run a credit report and actually submit
the file to a wholesale lender for underwriting before receiving
approval and commitment for a home
The message is simple; get a home
loan commitment first, then find your dream home. Getting
the order right will save you money when negotiating the contract.
And, not forgetting, it is a powerful negotiating tool when presenting
an offer to purchase. As an African safari guide once told me,
"you don't go tracking a lion, find him and then worry if
you have any bullets in your gun!"
By the way - we weren't hunting lions to shoot…
we just didn't want to be eaten alive!
© Noel Peebles, Market Leaders FSBO real
Noel Peebles is co-author of the best selling
FSBO real estate book
"Home Selling Secrets Revealed."
For details http://www.forsalebyownerguide.com