To prevent this from happening, the first thing your real estate agent will have you do is get pre-approved. Pre-approval lets you know exactly how much you are able to afford.
Pre-approval shouldn’t be confused with pre-qualification. The latter is usually performed with a lender over the phone, where they make an assessment of your borrowing potential based solely on the information you give them.
Pre-approval, on the other hand, is obtained through documented and verified information. Credit and employment histories are verified, as well as your income and cash-on-hand. This will give a lender a realistic portrayal of your borrowing potential.
This also helps you determine if there are any surprises on your record, allowing you to deal with them before you risk losing the home of your dreams. There are many horror stories regarding a credit history soiled by someone with a similar name, or even due to clerical errors. This is your chance to ensure you will not be adversely affected by such unforeseen events.
Pre-approval offers you strong negotiating advantages by increasing your buying leverage. It lets the seller know you are ready to buy. When faced with several offers, a seller often accepts the one submitted by a pre-approved buyer, even if the offer is less than the others. This is due to the fact that pre-approval is the next best thing to cash-on-hand. It also allows you the opportunity to close quicker, which can be very attractive to a seller.
For these reasons, pre-approval is an intelligent and advantageous option for prospective homebuyers. Contact your real estate professional for more information.