Should I Get Prequalified When Buying A Home?

Wednesday, March 17th, 2010

Burlington Vermont

Why get prequalified and then preapproved for a mortgage before you begin your search for a home? Because there are people who will benefit from your preapproval: You, your Agent, and the seller from whom you eventually buy a home!

You: The most important beneficiary, of course, is you. One of the most common questions we get from users of this site goes something along the lines of "Please let us know how much house we can afford." We're stumped! Why? There are simply too many variables--credit history, income, debt, special mortgage programs and variations in qualifying guidelines between different mortgage types--to answer that question. The only sure way of getting the question answered is through prequalification. The mortgage prequalification step is a relatively simple one, but it is an important one. It begins the process of formally applying for a mortgage, and it gives everyone involved--especially you--a clear sense of the direction they should be headed.

Your Agent: By knowing what your financial parameters are, your Agent can spend more time looking for houses that "fit" and less time pursuing dead ends. No matter how much you might want a 4000 square foot home for $275,000, if your qualifications say $125,000, your qualifications say $125,000. When it comes to mortgages, "yes, but" doesn't carry much weight!

The Seller: Want to strengthen your bargaining position? Get prequalified. Want your offer to stand out in a case of multiple offers for the same house? Get prequalified. Look at it from the seller's perspective. If you had 2 offers on the table for your house, one from a fully prequalified buyer and the other from an "I'll get around to that soon" buyer--to which offer would you devote the most attention? Even if the prequalified buyer's offer was $1000 less, would you take the chance on the buyer that perhaps may not be qualified? When it comes to a seller evaluating offers, "a bird in the hand..." definitely applies.It is important to remember that the amount of mortgage you will qualify for is the maximum. It is the amount that the lender feels you can afford, but it is not necessarily the amount that you want to pay. It sometimes is advantageous to be conservative here. For example, if you qualify for a $100,000 mortgage and you have $15,000 available in cash for downpayment and closing costs, you are qualified to buy homes with a maximum selling price of $115,000. So as to not push yourself to the limit, you may want to look at homes that sell in the $100,000 to $110,000 range. Too many buyers simply rush off to the $115,000 level and some find themselves strapped when it comes time to purchase necessary items (such as draperies, additional furniture and lawn and garden tools, for example) or when they forget to factor in increases in monthly expenses (for example utilities and maintenance and repair costs).

If you need a referral to a professional local lender who can prequalify you in preparation for purchasing a home, please call or email me. I would be delighted to assist you. I can be reached on my direct line at 802.238.5256 or email me at Chris@ChrisHurdVT.com

If you are considering listing your home for sale or buying a home, condominium or other real estate in Burlington, Vermont or in Chittenden County, please give me a call on my cell at 802.238.5256 or email me to discuss our real estate market and your options.

As always, please feel free to post any thoughts and comments right here on Hurd's The Word.

Update: Home and Condo Values in Chittenden County, Vermont

Tuesday, March 16th, 2010

Burlington Vermont

Tha age old factors of condition, price and location are influencing our market more so now than in recent memory.

Just a few years ago, Sellers were enjoying multiple offers in all price ranges. Today, the part of the market that is humming along is everything essentially under $300,000. That is the sweet spot in the market for sure.

In Burlington, Charlotte, Colchester, Essex Junction, Essex Town, Milton, Shelburne, South Burlington, and Williston sales for all of 2009 show the average sale to list price ratio being at or above 95%. Of course, much depends on the three factors listed at the outset of this article but on average 95%.

Recent data compiled by Vermont Real Estate Information Network (VREIN), shows the condo market on average across all the towns comprising Chittenden County (i.e. Burlington, Bolton, Charlotte, Colchester, Essex Town, Essex Junction, Hinesburg, Huntington, Jericho, Milton, Richmond, St. George, Shelburne, Underhill, Westford, Williston) have shown prices increasing by 10.8% between the period from February 2009 until last month.

Conversely, single family homes on average across all the towns comprising Chittenden County have fallen 6.6%. The data shows that in February of 2009, the average sale price was $319,024. In February 2010, the average sales price had fallen to $297,874 with sales picking up.

Conventional wisdom suggests that the recent surge in activity has come as a result of pent up demand, low interest rates, and the tax credits made available to first time homebuyers ($8,000) and for repeat homebuyers who have not bought or sold their primary residence in the past 5 years ($6,500).

Against the national and regional averages Vermont continues to hold its own.The Mortgage Bankers Association's National Delinquent Survey found 4.8% of mortgages in Vermont were seriously delinquent or in foreclosure during the last quarter of 2009. Compare that to the national average at 9.7% or the New England region at 8%.

Vermont ranked 46th out of 50 states with fewest delinquencies and foreclosures initiated during the last quarter of 2009.

Of course, location weighs heavily on the average sale price figures. It is important to compare prices in the town and immediate neighborhood you are considering purchasing to best understand what a given house should sell for. The age old adage "all real estate is local" remains the watch word.

If you are considering listing your home for sale or buying a home, condominium or other real estate in Burlington, Vermont or in Chittenden County, please give me a call or email me to discuss representing you, our current market conditions and your needs/wants in a new home and community. I would be delighted to assist you. I can be reached on my direct line at 802.238.5256 or email me at Chris@ChrisHurdVT.com

As always, please feel free to post any thoughts and comments right here on Hurd's The Word

Armed with solid numbers, buyers and sellers alike can manage their expectations and the current realities of our local market.