In the real estate industry, whether you’re a real estate agent or a mortgage lender, the words “preapproval” and “prequalification” should be part of your vocabulary. Unfortunately, many professionals use them interchangeably, although there’s a big difference between the two. Prequalification is a good start, but preapproval is better for purchasing a home. In this blog post, we’ll discuss why it’s important for real estate agents to ensure that their clients are preapproved, not just prequalified.
Prequalification vs. preapproval
Many people confuse prequalification with preapproval; however, these are two different things. Prequalification is an estimate of what a borrower can afford based on their self-reported income, debts, and assets. It’s usually done without verification and only involves a soft credit check. On the other hand, preapproval is a written commitment from a lender based on an applicant’s verified income, employment, and assets. It requires a hard credit check and gives a specific loan amount. Being preapproved is a much stronger position than being prequalified.
Confidence in the home search process
Having a preapproval letter in hand gives your clients the confidence to shop for a home within their budget. They won’t waste time looking at houses that they can’t afford and will avoid the disappointment of falling in love with a property that’s out of their price range. Additionally, real estate agents who have clients with preapproval letters have a better chance of closing deals.
Competitive edge for offers
In a hot real estate market, where multiple offers are common, being preapproved can give your clients a competitive edge. Having a written commitment from a lender gives sellers confidence that the potential buyer is financially stable and has the means to finance the purchase. It also shows that the buyer is serious and motivated.
Less stressful closing process
Once a buyer has been preapproved for a mortgage, the final loan approval process typically goes much smoother and faster. Since the lender has already verified the borrower’s financial information, the processing and underwriting stages can be completed more quickly, reducing the risk of surprises and delays in the closing process.
Protecting your reputation
As a real estate agent, having clients who get preapproved instead of prequalified is not only beneficial to your clients but also a good strategy for protecting your reputation. If your clients are prequalified and you take them to see a property that’s outside of their budget, they might be turned down for the mortgage. This could affect your credibility as a real estate agent, and the seller or other agents might doubt your competence.
As a real estate agent, you should always encourage your clients to get preapproved before they start looking for a home. It’s a crucial step that can save your clients time, money, and frustration, and it can help you close more deals. Explaining the difference between prequalification and preapproval to your clients can also set you apart as a knowledgeable and competent real estate professional. By ensuring that your clients are preapproved, not prequalified, you can help them achieve their dream of homeownership and strengthen your reputation as a real estate expert.
Learn more at www.colibrirealestate.com.
