Being preapproved for a mortgage before making an offer on a home is a wise decision and it will give you a better chance of winning your offer, but not all preapproval letters are created equal. Who your lender is could make or break your chances in the eyes of the listing agent and seller. Big banks and online lenders are notorious for a lack of communication, out of town appraisers and closing delays. Listing agents and sellers do not want to risk accepting an offer to later find out that the lender cannot close the deal, so they tend to go with the local lenders that they trust.
If your offer includes a preapproval letter from a local direct lender with strong reputation, the listing agent is much more likely to feel comfortable with your offer.
In most cases, the listing agent will also call the loan officer and if they pick up and answer the questions asked, the listing agent will be able to go back to their seller with the warm and fuzzy news. On the flip side, if they call and are unable to reach the loan officer in a timely manner, your chances of the seller accepting your offer is greatly diminished.
To have the greatest advantage over your competition, you should consider the following:
- Before you start shopping for homes, find a recommended local lender. If your realtor recommends them, they are likely a very safe bet. Realtors have reputations too, so there is no way they would recommend anyone they had concerns with.
- Complete your preapproval to know your financing options and limits – This will entail a review of your credit, income and assets (if you receive a letter without providing all of your financials upfront, you should find another lender)
- Make sure your lender responds quickly. If it takes days to get a return phone call or email, you will lose out on homes waiting for them. Your lender needs to be able to help you when you need them, which includes after work and on weekends.
- Ask your lender all of your questions up front. Be sure that you fully understand the your financing and your next steps before you make an offer. You should not be playing catch up after you are already under contract.
- Don’t choose your lender based only on rate. Rates change constantly, sometimes multiple times a day, so unless you compare apples to apples, rate could be slightly different with any lender you speak with. An 1/8 lower rate might save you $25/month, but the lower rate with the wrong strategy or loan program could end up costing you more in the long run. There is always a lower rate out there, but when you go with the lowest bidder, you might actually get what you pay for.