Mortgage Pre-qualification vs. Pre-approval: What you Need to Know

Purchasing a home is a process, and in the current competitive market, it makes sense to set yourself up for a successful experience. Getting pre-qualified for a mortgage loan proves to be a key advantage.

What is a Mortgage Prequalification?

In simple terms, being prequalified for a mortgage means that a lender has collected your basic financial information, and sometimes have completed a credit check, to give you an estimate of how much house you can afford.

What is Mortgage Pre-approval?

A mortgage pre-approval is one step ahead than mortgage prequalification. For a mortgage pre-approval, you complete a mortgage application. The lender will then verify the information you provide, and will also perform a credit check. If you are eligible, you will get a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount. This pre-approval offer is valid for 90 days.

 What Information Do You Need to Provide?

Pre-qualify	Pre-approval
Employment Information	Copies of pay stubs that show your most recent salary information
Credit Check	Credit check
Basic Information about bank accounts	Bank account number or two most recent bank statements
Down payment amount and desired loan amount	Down payment amount and desired loan amount
No tax information is needed	W-2 statements, personal and business tax returns from the past two years

 

Mortgage Prequalification vs. Pre-approval Comparison

	Prequalify	Pre-approval
Benefits	You can start looking for houses knowing how much you will be able to afford	You will be ready to make an offer to the seller. It will gain you competitive advantage over other potential buyers.
Process	Provide basic financial information to the lender and get a pre-qualification letter within minutes.	After submitting the required documents for the loan application, you will receive a decision within 10 business days.
Documentation	Need to answer a few questions designed to evaluate your financial situation, plus a credit check	Need a proof of financial information, plus a credit check

Pre-qualification vs. Pre-approval: Which One is Right for You?

For first-time homebuyers, a mortgage pre-approval tends to be more helpful, especially when they are establishing their budget for home buying and need an idea of how much they might be able to afford.

Pre-approval comes out really handy when the homebuyer is ready to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. The seller will take your offer more seriously if you have your creditworthiness and finances verified from a lender.

Should you buy a foreclosed home?

 

Whether you are looking for a home to live in, or rent out for income, or flip and sell, you may be tempted to purchase a foreclosed home.

But should you buy it? Is it a good option? For that, you need to understand some background information on foreclosed homes.

What is a Foreclosed Home?

A foreclosed home is a property that has been through the foreclosure process, which was initiated because either the borrower defaulted or failed to make monthly payments, and did not take alternative steps such as a deed in lieu of foreclosure or loan modification.

Once the bank or the lender takes possession of the property, it wants to unload it as quickly as possible, and oftentimes that means a significant discount for the next home buyer. To redeem its investment, the lender will send the foreclosed home to an auction, where a buyer or an investor purchases this property.

 

Now that you know about foreclosed houses, we should explore whether you should purchase a foreclosed property or not. So, here is the comprehensive detail of the potential advantages and disadvantages of purchasing a foreclosed home to make it easier for you to make a decision.

Advantages of Purchasing a Foreclosed Home

Here are some of the most common benefits of purchasing a foreclosed home

1. A Low Purchase Price

One of the major benefits of buying a foreclosed house is snagging a great deal. Lenders are eager to unload the property and recoup their money as soon as possible. This gives the new home buyer a chance to negotiate the purchase price down and pay less than he normally would for a similar home.

 

2. Opportunity to buy in a neighborhood that is otherwise out of reach

When you are buying a home on a limited budget, a foreclosed home gives you a chance to get into a neighborhood you otherwise couldn’t afford. This is important if you are looking to purchase a home in a particular district that either has the amenities you want or is closer to your office or kids school.

 

Disadvantages of Purchasing a Foreclosed Home

On the flip side, there are some disadvantages as well to purchasing a foreclosed home. For example

 

1. You will need cash if you’re buying a foreclosure at an auction

When you purchase a foreclosed home at an auction, know that you will need to pay the purchase price in full-cash.

Granted, that you do not need to come with the full price on the day of auction, but you will probably need it at least for the down payment. And you will need to pay the rest of the purchase amount soon after. So, purchasing a foreclosed home is only a good option when you have enough cash flow going on.

2. You may need to purchase the property as is

Homeowners who became unable to put the monthly mortgage payments probably had cash-flow issues, so their properties are usually left in dis-array. Furthermore, lenders that possess the foreclosed homes rarely make any repairs. So, when you buy a foreclosed home, you probably have to purchase it as-is.

 

 

3. Your closing may be delayed

Although lenders tend to unload foreclosed properties quickly, the closing process can be escalated. As lenders often have backlogs that delay closing. Therefore, if you want to move into your new home quickly for some reason, you may want to think twice before buying a foreclosure.

 

Bottom Line

On the surface, foreclosed homes seem very appealing. However, costs can be highly unpredictable and the underlying damage could make a property undesirable. The buying process is also very sluggish so it’s important that you assess the risks thoroughly before you make any decision on purchasing a foreclosed home.

While that being said, foreclosed homes can also end up being incredible deals for some buyers. But you should work with an expert and have a game plan for the required cash-flow to take advantage of such a situation.

How long does a home sellers have to respond to an offer?

Purchasing a new home is an incredibly exciting event, but it can also be very stressful. Finding a home that fits your needs and desires is not always easy, and it takes a lot to finally decide to put an offer in. Once you submit your offer, you have to just wait for the seller to respond. Time does not move slower than when you are waiting. 

But how long do you need to wait for?

While there are general time periods and some state rules, there is no set time period. In this post, we will dive into the details of how long a home seller has to respond to an offer from a buyer. 

How long after making an offer on a house do you hear back?

Making an offer on a house is only the first step. As a buyer, you may have several prospective houses and be eager to move forward with one. Oftentimes, you will make your offer on your top prospect, but another home will not be far behind. Of course, you want to give your top option a chance before moving on to the next in line. But how long will it take to hear back from a seller?

The time frame greatly depends, but generally, sellers respond within 48 hours. 24 to 48 hours is the typical timeframe you can expect to hear back about your offer. However, there are cases where a seller may take longer than that. 

Waiting for the seller to respond to an offer

Waiting for the seller to respond to your offer may seem like an eternity, but always remember to be patient. The seller is also making a big life decision and wants to make the best one. Allow the seller an adequate opportunity to review and respond to your offer. While you wait, review your offer to determine if you could better the offer in any way and what you may be willing to adjust if there is a counteroffer. 

How long does a seller have to respond to or accept an offer?

The offer itself, as well as the state you live in, will determine how long the seller has to respond to or accept the offer. Some states, like California, have set time limits for responding to the offer. However, many states do not have these regulations. Consider setting a time limit on your offer if you are concerned about how long the seller will take to respond. 

How long does a seller have to respond to or accept an offer?

As a buyer, you can determine how long the offer will be valid. Setting a timeframe will help ensure you receive a response in a reasonable amount of time, but make sure the time limit is fair and does not rush the seller. Keep in mind that the timeframe will likely be longer if a bank is the one selling the property. If you add a time limit to your offer, the offer is only valid until that date and time. Should the seller miss the deadline, the offer will expire. 

The minimum amount of time you must give a seller to respond to your offer is:

If you do choose to add an offer expiration clause, you may wonder what the minimum amount of time you must give is. While you can decide how much time you would like to give, it is important to be reasonable. Rushing the seller will not make them more likely to accept or respond to your offer. It is recommended that you offer at least 48 to 72 hours for the seller to respond. 

How long do buyers have to respond to a counteroffer?

Counteroffers are a common part of the home buying process. Once a seller submits a counteroffer, the ball is in your court. Some counteroffers will include a time constraint. If it does not, the best practice is to respond within 24 to 48 hours (72 at the latest), just as you want the seller to. 

What if the seller doesn’t respond to my offer?

One important thing to remember is that a seller does not have to respond to an offer. Ever. Sometimes, sellers will not respond to an offer they find too low or unreasonable. The seller is not required to send an official rejection letter. If you are really interested in the home and the seller never responded, it is best to resubmit a better offer with new terms. 

Ultimately, there is no standard timeline for when sellers must respond to your offer. Typically, most sellers respond within 72 hours. You can include a time limit in your offer, but you should be reasonable as well. Check with your state to see if it has any rules regarding residential purchases as well. Successful negotiation is about finding a balance between patience and assertiveness.