Always have your financing ready before you start your dream home shopping especially in areas like Arvada and the Denver metro. Financial readiness can make all the difference for any homebuyer.
What Financial Readiness Matters: A Real-Life Example
Recently, a buyer toured one of my listings twice. Her agent said she wanted to make an offer once her financing was secured. She was planning to work with her parents to submit a cash offer.
A few days later, I received an offer from a different buyer.
Buyer #1 then scrambled to submit her offer. Her parents were delayed meeting their financial advisor. She got a pre-qualification letter (not a pre-approval) from a national mortgage company just two hours before submitting her offer (think 1-800-mortgage).
Meanwhile, Buyer #2 had full underwriting from a local lender I knew.
Now, we had a multiple offer situation. Both buyers resubmitted stronger offers.
Buyer #1 offered a higher price. Buyer #2 was close in price and could close quicker.
In this market, finding the right buyer who gives confidence the deal will close is crucial. My sellers chose buyer #2 who had a strong local lender who had already done the work required to close quickly.
Buyer #1 lost the house because her finances weren’t in order. Not only that, she would have paid more had she won due to her delay in obtaining financing.
Buyers, here are your takeaways:
- Always have your financing ready before shopping.
- I strongly recommend working with a local lender who understands your market and who just may know the seller’s agent.
How to Avoid Losing Out on Your Dream Home: The Importance of Financial Preparedness
Having your financing ready before you start shopping for a home is essential for your success as a home buyer in Arvada and across the Denver metro area.
Recently, this point was driven home during contract negotiations for a Dempsey Group listing:
A buyer toured one of Dempsey Group’s Arvada homes for sale. She saw the home twice and was eager to make an offer. Her agent indicated she intended to submit a cash offer with the help of her parents but needed to secure financing first. It seemed promising, but things quickly changed.
A few days later, the sellers received an offer from another buyer, which put the first buyer in a difficult spot. Her parents faced delays with their financial advisor, forcing her to get a pre-qualification letter from a large, impersonal mortgage company just hours before submitting her offer (a pre-qualification letter is not as strong as a pre-approval letter).
At the same time, the second buyer had already secured full underwriting from a trusted local lender. This led to a multiple offer situation. Both buyers came back with stronger offers, with the first buyer offering a higher price. However, the second buyer’s offer was very close in price and came with the advantage of a much quicker closing and more secure financial situation.
Today’s market is nuanced and the certainty of closing is crucial – sellers want to avoid going back on the market if a deal falls through. Certainty to close can be more powerful than price sometimes.
In this real-life situation, the sellers chose Buyer #2 because they had a reliable local lender and were ready to close quickly. Unfortunately, Buyer #1 lost out because her finances weren’t in order. Not only did Buyer #1 lose the home, but had she won it, she would have ended up paying more than she would have had she offered sooner and
her financing had been secure – due to the delays in securing her financing, a multiple offer situation took place, increasing the price.
Home Buyers, Here Are Two Takeaways For Your Dream Home:
Financial Readiness Important Before Shopping Your Dream Home
In a competitive market, having your financing ready is crucial. This preparation means obtaining either pre-approval or full underwriting before you start viewing properties. With financing in place, you can act quickly and avoid the stress of scrambling to secure funds when you find a home you love. This ensures you can act quickly when you find your dream home.
Choose a Local Lender for Added Support
Working with a local lender provides an additional advantage, as they understand the nuances of the local market. Additionally, they often have established relationships with real estate agents, which can help solidify your offer in a multiple-offer situation. They understand your market and might even know the seller’s agent, giving you a competitive edge.
Pre-Qualification vs. Pre-Approval: Understanding the Difference
When entering the home-buying process, it’s essential to understand the difference between a pre-qualification and a pre-approval.
Pre-Qualification
A pre-qualification is an initial estimate of what you may be able to borrow based on self-reported information. It’s helpful at the beginning of your search but doesn’t provide the level of security or commitment that a seller wants to see in a competitive market.
Pre-Approval
A pre-approval goes a step further. It requires the lender to verify your financial details, including credit history, income, and assets. Pre-approval shows the seller that you’re serious and have the financial capability to close the transaction.
Full Underwriting
Full underwriting, the most secure option, means that your lender has verified all necessary financial information upfront. This preparation ensures that once you make an offer, you can proceed without financing delays.
Frequently Asked Questions (FAQ)
- Why is it crucial to have financing ready before shopping for a home?
Having financing ready lets you act quickly when you find the perfect home, prevents bidding wars, and instills confidence in sellers, making you a more attractive buyer. - What’s the difference between pre-qualification and pre-approval?
Pre-qualification provides an initial estimate based on self-reported information, while pre-approval involves verifying credit and financials, giving a stronger commitment to the seller. - How does working with a local lender provide an advantage?
Local lenders understand the market, often know local agents, and provide faster, more personalized service, making your offer more appealing in competitive situations. - Is it risky to rely on a large national lender?
While convenient, large national lenders may lack market knowledge and offer impersonal service, leading to potential delays or complications in competitive situations. - How does full underwriting improve my chances in a multiple-offer situation?
Full underwriting means your lender has reviewed all financials upfront, showing sellers that you’re fully prepared to close quickly and without financial issues.
Final Thoughts: Financial Readiness Is Important for Your Dream Home
The Denver real estate market can be challenging and filled with hard decisions to make, but being financially ready can make a significant difference. As your trusted realtor in Arvada and Denver, CO, Lauryn Dempsey is here to guide you through every step of the process. Reach out and contact us at the Dempsey Group today and find your dream home tomorrow!
If you are looking for quick hits on the market, follow Lauryn Dempsey on LinkedIn to get daily insight. If Lauryn can help you strategize your next steps in real estate in the Denver metro or elsewhere across the U.S., please book a call with Lauryn!