Mistake _3. Not Getting a Preapproval Letter

A branch manager at First American Title Company recently estimated that about 30 percent of the transactions at her branch fall apart or get delayed before closing. The biggest reason is that buyers don’t have their financial ducks in a row before they make an offer. Sometimes this results in lost time and embarrassment; other times earnest money is forfeited, too.
You can solve this problem by contacting a mortgage lender before you start looking at homes. Go through the complete preapproval process and get a letter from your mortgage lender stating you’re good to go for a certain dollar amount.
This preapproval letter gives you the following advantages:

1. You’ll know exactly how much home you can afford, how much down payment you’ll need, and what your closing costs will be.
2. You won’t waste your time looking at homes not in your price range.
3. When you do find the home of your dreams, you’ll be able to make a strong bird-in-the-hand offer that sellers will find harder to counter.

When Ryan and Brittany felt they were ready to buy their first home, they met with a lender recommended by their buyer’s agent. After a credit check and verification of their employment and source of down payment, the lender issued a preapproval letter. The next step was house hunting, and after a couple of weeks, Ryan and Brittany found their dream home. When their agent called to arrange a time to present the offer, she was told there was a competing offer the sellers would also be considering.
Both offers were presented to the sellers, and the competing offer was $1,500 higher than Ryan and Brittany’s offer. Their agent, a real pro, pointed out to the sellers that her clients were loan approved and gave them the letter from the mortgage company. She noted that her clients’ offer was a bird-in-the-hand, that they could close in three weeks or less, subject only to the appraisal. The competing buyers’ agent had not gotten his clients preapproved, and their offer was subject to mortgage approval.
The sellers chose to go with the preapproved offer over a $1,500 higher but riskier offer. Obviously, they didn’t want to take their home off the market and wait a week or two to find out if the buyers qualified. Timing and a sure-thing approach will often win out over a higher offer.