You found the perfect home in the ideal neighborhood and you want to make an offer. Great, right? Well, maybe not, especially if you are not properly prepared. 

In this competitive real estate market with low inventory and high demand, you might find yourself in a bidding war with tight deadlines.   Be aware, though, that regardless of how high your offer is, a seller may not even consider it without a pre-approval.

So, before you fall in love with a home or submit an offer, you should get pre-approved for a loan with a reputable local mortgage company. 

What is a pre-approval and why is it so important?  

According to Shant Banosian, Branch Manager at Guaranteed Rate Mortgage Company of Waltham, MA, the pre-approval process is more important and thorough than ever before and includes three main elements:

• Credit Review

• Income Verification (two years of income statements or W2s)

• Asset Review (to ensure that you have the required assets to make a reasonable down payment)

He adds that potential buyers should contact a local bank or mortgage company for this pre-approval and not rely on online pre-approval letters. In fact, many listing agents will not accept online pre-approvals.

Mr. Banosian states that a pre-approval represents confidence to all involved in a real estate transaction:

• The buyer agent is confident that the buyer they are submitting an offer for is qualified to purchase the home.

• The buyer can now confidently place an offer on a home knowing that they can afford the payments and that they will qualify for the loan.

• The seller can consider the offer with a great deal of confidence that a lender will approve the buyer for a mortgage at the required dollar amount.

While this process does not guarantee that the buyer will be approved for a mortgage on a particular home, it does provide a high degree of assurance to both the buyer and seller.  In multiple offer situations, having a pre-approval gives the buyer a competitive advantage.

In this hot sellers’ market, a pre-approval is only one factor used by sellers to decide on which offer to accept; many buyers are also waiving the mortgage contingency, foregoing inspections, adding flexibility with closing dates and writing heartfelt letters to the sellers. 

Suzanne Koller, of Suzanne and Company, Keller Williams, Realty Boston Northwest adds, “While each situation is different, it is fair to say that the best offer is not always the highest.  An experienced buyer agent can assist you in making the right decisions when putting in an offer on a particular home.”  She adds, “In today’s market, buyers must have both perseverance and patience, but don't worry, the perfect home is out there.”

Happy House Hunting!