For years America has traditionally approached the home purchase process backwards. Potential home purchasers scour the earth for just the right home for weeks or months at a time. They then spend more time negotiating the best deal. Then the fun really begins when the purchaser approaches a lender and says: “Can you get me in the house ASAP? It took me so long to negotiate the deal that my landlord has rented my house and I have no where to take my family!”
Perhaps this situation is a slight exaggeration. Most do not spend six months in the purchase process and then expect to get a loan and settle in a few hours. Yet, the absurdity of the situation does not go away when the time frame is less ominous.
Why shouldn’t a homebuyer get a mortgage first before they contract for a new home? Or, at least why shouldn’t the lender be processing their application while they are shopping? In fact, there are several reasons why you would benefit greatly by turning the purchase process around. Getting a LoanFirst brings many advantages to the table:
Save Time. You will save time because you will never be looking in the wrong place. Having an approval up-front gives an assurance regarding the price range for shopping purposes. Of course, the lender will also save time because they will not be processing an application based upon a transaction that will be subject to change.
Of all the benefits derived from the program, there is none which is more significant than the issue of time. No matter who you are or what job you have, time is your most precious resource. We can never recover a lost minute.
Less Stress. All parties will be subject to less stress because potential problems can be resolved up-front rather than a few days before settlement. Nothing adds more stress than discovering a problem with loan approval and not having enough time to resolve the problem efficiently.
More Confidence. The purchaser will have more confidence to enter the home buying process. Many potential buyers do not have the confidence necessary to purchase a home. They would like to buy, but they do not have the confidence to go forward. Having a commitment in-hand gives you a clear go-ahead signal.
More Negotiating Power. A commitment for an approval results in increased negotiating power for the homebuyer. Any seller faced with an offer on their home will be more interested if convinced that they are dealing with a real buyer. Nothing is more effective in showing your sincerity than having a commitment for approval in-hand. When a seller is faced with dual contract presentations, the offer that is accompanied with such a commitment is sure to have an advantage. Why would any potential homeowner go to battle without this important weapon?
Quicker Settlements. Settlement can occur more quickly because the lender is working while the customer is shopping. If the homebuyer (or seller) desires a quick settlement, a LoanFirst will enable it to happen. When the mortgage is already approved, all that is needed to be added to the file is an appraisal which many times can be obtained in a few days.
It should be noted that a LoanFirst is not a pre-qualification. Many lenders pre-qualify a potential purchaser over the phone without verifying the information. The shopper receives an opinion which has very little legal basis because it will be subject to all information being verified in writing and running credit checks. A LoanFirst is a full approval that is solely missing a property appraisal and valid sales contract.
It is clear that everyone involved in the home purchase process — the purchaser, the seller, the Realtors and even the lender — would benefit by continuously relying on a LoanFirst. There are very few examples of a loan program which involves such a win-win proposition for all of the actors within the process.
It is time for America to wake up and stop doing it backwards!