The Bargaining Power of Mortgage Pre-Approval

By Jonathan Haeber
CMR Columnist

With a pre-approval letter in hand, you venture into your first new home tour. You browse around, and then comes the fun part: bargaining with the agent. The agent goes back to the owner and reports on what buyers are offering. If you're lucky, the owner will accept your offer and you can be in your new home within weeks.

In the past, pre-approval gave you a jump up from scores of other buyers making offers, often higher than the asking price. Now, it's a buyers' market, and your letter of qualification for a new home loan means that you're a motivated buyer. And if there's anything that will interest motivated sellers in a faltering real estate market, it's a motivated buyer -- even if you're offering less than asking price.

First Step in Getting Mortgage Pre-approval

So what's the first step? First you should find a mortgage calculator (available here, at Californiamortgagerate.com). You'll find out exactly how much home you can afford. Try to use the mortgage calculator to find out monthly payments for three different types of loans: 30-year fixed, 15-year fixed, and 5-year adjustable. Only take the five-year adjustable as a last resort, and only if you feel that you can handle any future interest rate increases.

Once you have the home price that you're shooting for, look for a mortgage lender. You can use the easy form on this website to find rates from up to four competing lenders. Find the rate that best works with you (don't forget to look at the fine print!). Then, apply for the loan to get pre-qualified.

Negotiating Asking Price with Pre-approval

After finding pre-approval for a home loan, you can request a letter of approval from the lender. Bring that with you to open houses; make your offer; and don't accept a high price. Remember: We're in a buyer's market. You have a step up!

Source
New York Times: Pre-approval for a Mortgage

About the Author
Jonathan Haeber is a marketing writer for Discovery Channel Stores. He recently purchased his first home, and took a self-taught crash course in home mortgages.

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