Mortgage pre-qualification - why it can help you close the deal
In the property game there are two ideal scenarios. The first is a serious seller who is happy to price their property competitively. The second, a serious buyer with a clear idea of what they want. In these scenarios the chances of matching buyer and seller is strong.
But what about the rest of the market? Here it takes a little bit extra, and a pre-qualified mortgage application in the hands of the potential buyer could make the difference.
Saul Geffen, Chief Executive Officer at MortgageSA, this week said it could be this reassurance, provided in the form of an endorsed certificate from a recognised mortgage originator or similar accredited financial services provider, which sways the seller. Or in a case where it looks like competing offers may shortly be made for the same property, he said the pre-qualified certificate could clinch the deal for the buyer.
Historically most banks were prepared to do a formal home loan pre-approval, which basically guaranteed that the finance would be made available to the buyer on request.
"The banks have moved away from the pre-approval service because it requires them to go through a complete mortgage application process with very little client loyalty when taking up the bond. Historically the pre-approval took as long as an application. This resulted in duplication and bottlenecks in approving legitimate bond applications and so the banks stopped this service," said Geffen.
To aid and inform homebuyers MortgageSA introduced formal and certificated pre-qualification. This is not the absolute guarantee offered in a pre-approved scenario, but it does detail the financing options available to a potential buyer subject to them meeting the bank's lending criteria. Geffen said MortgageSA uses similar credit scoring models as the banks in issuing its prequalificiation certificates.
"As a result the number of MortgageSA pre-qualified clients not being granted a bond when formal bank application is made, is minimal. Pre-qualificiation really does give both the buyer and the seller peace of mind," said Geffen.
For buyers there are a number of advantages. First, it introduces them to the process of applying for a mortgage. This is particularly useful for first-time homebuyers. They get a clear indication of what they will be required to show the banks on formal application, and don't feel intimidated when the formal application gets underway. Buyers also get a clear view of their budget range and can house hunt accordingly. Once they've found their house, the process of originating a mortgage for them is quicker as the bulk of the required information is already on hand.
For the seller a pre-qualified mortgage certificate indicates a serious buyer. It indicates the buyer's ability to secure funding. The pre-qualified buyer will, in all likelihood, be granted finance swiftly.
Many sellers lock themselves into a sale and then wait for the buyer's finance to be approved. If finance is not granted, the chances are the serious buyers have moved on and the seller has to start the marketing of their property from scratch.
Geffen said MortgageSA has invested a significant amount in the technology and infrastructure required to provide pre-qualification certificates.
"Our team can generate a certificate in no time at all, and we'd be happy to assist any buyers with the process," Geffen said.
Among the clutter of speculative offers to sell, and less than serious buyers, the pre-qualified certificate sends a clear signal of intent. That might be all it takes to clinch the deal.