Be careful not to negotiate against yourself. This may sound like a strange sentence, but really it’s a caution about pre-approval letters. You already know that it is in your best interest to talk to a lender before looking at homes so that you can know what you can afford.
A pre-qualification letter is not worth the paper it is written on. As discussed in earlier TIPS, you want a pre-approval letter, based on the home appraising at the price negotiated. Your pre-approval letter should match the amount you are offering for the home. This should be less than what your approval qualifies you.
For instance if you are looking at a home priced at $425,000.00 and your pre-approval letter says that you qualify for a loan for $450,000.00, but you are offering $410,000.00, your pre-approval just negotiated you to pay the price the home is listed. A savvy listing agent will take note of this and tell the seller to negotiate a higher price. The pre-approval letter should instead state that you are pre-approved for $410,000.00 – the amount you have offered. This puts you in a position nearly as strong as a solid cash offer. The listing agent will often suggest the seller take your solid offer with little or no negotiating of price.
Remember you still will have some conditions about the home that will need to be met, such as septic approval, home inspections, and other negotiations. Only after you have established your buying power will you be ready to really look at homes in your price range and know what is your range. Now that you are ready to look at some homes and make an offer, drop me an email or give me a call. Let’s get started.