Unless a buyer intends to make a cash offer, its always important for buyers to get pre-qualified for a mortgage prior to buying a home. However, its not just about being pre-qualified to buy the next home. Unless the buyer is looking for a 2nd home/investment property, or is a first time buyer, they must focus on selling their current residence first. Despite the fed rate cuts, the market and mortgage industry are more stringent now then ever.
This past year or two have been pretty rough for those in the industry, but also for buyers and sellers. We have all heard horror stories about buyers who were pre-qualified prior to the falling out of the sub-prime mess, who found they were no longer qualified, sometimes days before closing due to their bank going out of business or program changes. For many who were mid-negotiation on a deal, this meant losing their dream home and starting over again. For sellers, it meant losing a sale.
Still, to my surprise, many buyers browse homes, and many agents take them out without requesting or asking if they are pre-qualified. It is important for both the agent and the buyer. Typically, buyers may be looking in an unrealistic price range, or perhaps haven't yet sold their primary residence to make the next transaction. Many a buyer (and agent for that matter) just do not realize its not that easy to get a bridge loan anymore. And, there are many criteria and caveats with those few lenders who do.
Recently, I was working with some buyers who were afraid to sell their home first, fearing they would be homeless. They wanted me to show them their "dream home" that they planned to buy on the other side of town. When I politely asked them if they were pre-qualified, they looked at me funny. They said they could easily get a bridge loan and would sell their home when they could. After learning about their situation, being a mortgage broker as well as an agent, I knew they had either been advised a few years (or months) ago, or were ill advised.
There is so much to think about for buyers its easy to overlook some very important details. Its important for agents to advise clients to speak to a reputable mortgage professional prior to shopping for a home, as it can save a lot of time and aggravation for all parties. For the clients in my example, they wouldnt have gotten their hopes up on their "dream home" on the other side of town, since they didn't qualify for a bridgeloan unless their current residence had a pending sale. They had unfortunately been avoiding placing it for sale, for fear of not having a home if they sold first. For many buyers, you have to first put your home for sale, and once you have a solid offer/contract, a qualified agent will be able to put contingencies into the offer on your next home, so that you don't lose, if the sale of the first falls through.
This is a great example of how mortgage brokers can be a great asset for buyers. Many small banks wont even look at bridge loans, and while they are still possible, the mortgage broker will be the best bet in hunting them down in this type of market.
Moral of the story- its definitely possible to buy your dream home, but speak to professionals who know how to do their job and are abreast of the ever changing market.
Scott Richardson, Realtor, Certified Mortgage Planning Specialist
Authorized to originate loans in the following states:
1st Mortgage Broker AK, CT, MA, MI, MN, MO, NM, NY, ND, VA
2nd Mortgage Broker AK, CT, MA, MI, MN, MO, NM, NY, ND, VA
