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Kathy Godin's Blog

By Kathy Godin | Mortgage Broker
or Lender in Raleigh, NC

Does Getting Pre-Approved for a Mortgage Mean Anything?

Previously, I wrote that mortgage approvals aren’t final until the money changes hands.  If true, does getting pre-approved for a mortgage mean anything?

Let’s visit Karen, our conscientious real estate agent, once again.  After I informed her of the fact that mortgage approvals aren’t binding; that the question of approval remains open until the closing, she began to question the value of getting buyers pre-approved.

Karen’s clients depend on pre-approval letters.  Buyers make commitments thinking they received approval on a mortgage.  The cost of these commitments can be financial or personal.  Sellers also count on pre-approval letters.  They commit to selling their home to a buyer they believe approved for a mortgage.  Their home effectively comes off the market.  Steps taken to move on with their lives have consequences too.  Why bother?

I’ll tell you why.  First let me point out that the mortgage approval process resembles a scale.  At one end, the mortgage application is denied.  The other end stands for approval.

    

  Denied |---------------------------------| Approved

The space between Denied and Approved represents the likelihood of approval.  It’s like going for a long walk.  Each step takes you closer to your destination.  Getting pre-approved represents the first step of a buyer’s walk toward approval.  It improves the odds of success.  Walking blind (not getting pre-approved) offers no protection at all to either the buyer or seller.

Let’s return to our analogy of going on a long walk.  What happens if you take a wrong turn?  It interferes with meeting your goal of reaching a specific destination.  Mortgage approvals can take wrong turns too – the process gathering information/documentation can sometimes jeopardize approval – depending on what is found.  In either case, one must take steps to get back on the path.

The mortgage approval process is not a leisurely walk – it’s a timed work.  The destination, approval, has a deadline.  It’s nor a “get to it when you can” process.  A timetable must be met or there are negative consequences.

Getting pre-approved – Why bother?  Karen decided that…

1.  It provides some assurance that buyer can afford to buy.  It’s a screening process – not a guarantee.

2.  It starts the process.  It reduces the time needed to complete the mortgage approval process.  Some of the work was completed prior to buyer and seller reaching agreement.

How much assurance does pre-approval provide?  I’ll address that issue next time.

Kathy Godin, Award-Winning Loan Officer and Branch Manager

Prime Mortgage Lending, Inc.

(919) 789-9933

Where people, not computer robots, answer the phone.

Proudly Serving All of North Carolina

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