Though it’s not uncommon for a buyer to be offended or taken aback by the fact that a Realtor won’t show them houses without their being pre-approved by a lender for a mortgage, there are many reasons why they not only should NOT be offended, but why it benefits them!
1) Your lender will tell you how much you are approved for – and about what the payments will be at that price. This will help you determine what your monthly budget will allow in terms of the purchase price of your next home. Many times, lenders will approve buyers for more than they really feel comfortable spending. So it’s important to discuss your expected monthly payments with your lender. Also, expect that these might increase as taxes increase!
2) If you are shopping for homes without a pre-approval, you might be looking at homes that you would never be able to afford, and thus will end up being disappointed no matter what you end up buying, because it won’t match that “dream home” you saw that cost $50,000 more that you can afford!
3) Lenders will be able to tell you what financing programs might apply to you. If you get an FHA loan, then they have strict guidelines on the habitability of a home – some foreclosed, bank owned, and short sale homes cannot meet these restrictions. If you get a Conventional mortgage, then you have to make a larger down payment but you can get out of paying PMI (monthly mortgage insurance). And in some areas, you can find no money down financing – which is great to know if this applies to you because it saves you some money upfront, which you could then put into updating a lower priced home, thereby saving you money in the long run.
4) When you find a home you love, you need to be ready to make an offer! Trust me, it’s absolutely heartbreaking to find the perfect home only to have another offer being submitted by other buyers at the same time you find it – and you still need to get pre-approved! This often makes buyers lose out on their house they love, leaving them disappointed. Houses are selling quickly in today’s market! Usually only 24-48 hours is given for sellers to respond to an offer, so they must make a quick decision and if you don’t have proof that you’re able to obtain financing, then they will always pick the offer that does have that proof.
Beyond the benefits to buyers, there’s other benefits – specifically to sellers (don’t forget that you’ll be a seller one day, even if you don’t have a home to sell right now). As a homeowner, you don’t want to be inconvenienced and asked to leave your home, pack up your dogs and kids and go away for an hour or so – and usually during a time that your kids need to be doing homework, eating dinner, and getting ready for bed! Additionally, a pre-approved buyer is less likely to steal from a home that they’re viewing – medicine, jewelry, and other valuables sometimes show up missing from persons with “sticky fingers” viewing a home.
Last but certainly not least, there is an inherent danger with being a Realtor. There is a risk every time you head out to meet a client at a home. You never know what might happen when you walk in that door, and all the safety procedures in the world might not help you if the potential “client” has ill intent. This is brought to the forefront as an Arkansas Realtor has gone missing this past week. At this time, they have a man in police custody, but the agent is still missing and they do not have any clues to her location. Had she gotten a pre-approval from this client, they’d have known immediately who he was and where he lived. While she likely wouldn’t have known he’s been incarcerated recently, he also likely wouldn’t have gotten pre-approved considering his lack of work history over several months/years.
I share all this information with you in hopes that buyers will better understand that Realtors are not accusing them of being un-creditworthy, but that we are protecting buyers’ hearts, sellers’ homes, and our lives. I hope you’ll say a prayer for Beverly Carter, the Realtor missing in Arkansas.
By Kali Cooper, talktotucker.com/kali.cooper
