Even though real estate markets are local in nature, there is a common theme emerging in many cities with busy real estate sectors. Over the last few years, we have seen that cash really is king. This has certainly been the case in the Miami real estate market. Although many cash buyers of Miami properties for sale are foreign investors, plenty of domestic investors and ordinary folks are utilizing cash for their purchases as well. Obviously, sellers prefer cash offers to financed offers, so this can put finance-reliant buyers into a tricky position.
Housing inventory has been climbing, but the quantity and quality of the supply isn’t necessarily meeting buyer demand. As a result, some cities are witnessing outright bidding wars for the more attractive properties, which don’t linger on the market for very long. Because of this phenomenon, buyers intending to finance a purchase need to present their offers with a little something extra to demonstrate serious intent as well as the ability to close the deal. Buyers can do this by providing proof of financial backing when submitting an offer.
Contrary to what many people think, there is an important distinction between a buyer who has been pre-qualified versus pre-approved for a loan. In general, obtaining pre-qualification is a fairly quick process. It involves a preliminary evaluation of the credit-worthiness of a potential borrower. The assessment is used to estimate the amount that the prospective borrower can afford to repay. A pre-qualification letter generally includes a rough estimate of the range that a borrower could obtain from the lender, but there is no guarantee that the borrower will actually be approved for that amount until a comprehensive assessment is conducted.
On the other hand, the pre-approval process entails a more rigorous, thorough analysis of a prospective borrower. A lender that furnishes a pre-approval letter for a borrower is providing written confirmation of the maximum amount that the borrower may obtain from that lender. The pre-approval process includes an analysis of the prospective borrower’s income, assets, liabilities, and credit report. Thus, a borrower that has been pre-approved for a loan is virtually guaranteed the ability to borrow the amount quoted.
Clearly, there is quite a difference between the two processes and the weight of the letter provided. Thus, serious buyers should consider researching the various mortgage options available. Upon finding the right mortgage with a particular lender, it is probably worth seeking pre-approval prior to making an offer. After all, if cash won’t be part of the equation, providing a pre-approval letter when presenting an offer is the next best option.