Before you visit any home, condo, cooperative or commercial properties, unless you intend to pay all cash, it is important that you get pre-qualified and/or pre-approved with a mortgage lender that regularly lends in New York City or Long Island (Nassau and Suffolk Counties). There are several reasons why it is important that you are at least pre-qualified if not pre-approved:
You will have a better understanding of the actual price range that you will be able to afford, thereby allowing you to focus your search. Often, buyers can actually afford more than they initially believe and therefore they waste time looking at a home, condo, coop or commercial property that do not actually meet their criteria.
Due to the competitive nature of the market, when you make an offer and if it is backed up with a pre-qualification and/or pre-approval from a recognized mortgage lender, the offer will then be much stronger than others from buyers who are not pre-qualified or pre-approved. In other words, by being pre-qualified or better, pre-approved, you are giving yourself a competitive advantage over other buyers. Of course, this also means that if you are not pre-approved, you are putting yourself at a competitive disadvantage vis a vis other buyers. Once your offer is accepted, having been pre-approved will speed up the closing process. If you had not been pre-approved, it is possible that various surprises might pop-up and threaten the deal.
What is the difference between pre-approved and pre-qualified you ask?
Pre-Qualified: This is the most basic of research, many times done verbally over phone, that a bank would do to figure out how much you would be able to mortgage. When sitting down with a mortgage broker or banker, you would tell them what your financial situation is, how much income your household has and any various debts and/or installment or student loans you may already have. Using this, the lender would immediately tell you how much they believe you could afford. This is not a guaranteed loan, but a pre-qualifying idea of what the bank would lend you.. This is simply based on what you tell the bank and your ability to repay the mortgage is usually looked at by a seller to be worth as much as the paper it was printed on.
Pre-Approved: This is an in-depth look at all of your finances, income and assets based on legitimate documents that you would present to your lender. The mortgage lender would then take your information and send it to their mortgage underwriters. This allows them to research to figure out how much they would be willing to lend you. Once you are pre-approved for “X” amount, you may go to a seller, through your broker or agent and inform them that a bank is willing to provide a mortgage for the necessary amount needed. (This is not fully guaranteed either, but is based on an executed contract of sale, engineer inspection and bank appraisal of the home and their market analysis).