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Written by Tamara Schmitt
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Friday, 25 November 2005 |
A fairly complete financial portrait of the buyer is revealed in a purchase contract, which works to both parties' advantage. An offer is far more attractive to a seller if the buyer is preapproved for a loan. Preapproval is not to be confused with prequalification. Prequalification is merely the result of a loan officer asking a few questions and typing up a superficial letter.
Preapproval from a lender is far more meaningful because the mortgage company has done the same due diligence necessary for full approval. The only thing missing is the appraisal and title search on the house. Being preapproved turns a buyer into someone akin to a cash buyer, which resonates much better with the seller. A buyer could save thousands of dollars having this advantage in the negotiations. Many mortgage companies will preapprove at little or no cost if they can check your credit and verify your income and assets.
When you write up a purchase contract, define the maximum interest rate at which you are prepared to finance. This is to protect yourself against volatile, escalating interest rates, which could land you with a much higher mortgage payment than you had anticipated. At the same time, the seller will probably want to see that you have some flexibility in the financing terms you are willing to accept. |
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Last Updated ( Tuesday, 22 August 2006 )
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