Get Committed: How to Get Home Financing With "Cash Offer" Power

Posted by Laine Smith on 3/1/16 2:48 PM

Topics: Home Buying

Existing home inventory is lacking and mortgage rates are hovering around record lows. What does this mean if you’re planning on buying a home in the near future? You may come up against some competition during your home search. If you’re starting to shop for a mortgage, here’s how you can obtain home financing with the power of a cash offer.

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Get Committed

Meeting with a lender should always be your first step when you decide to buy a home, regardless of it being your first purchase or tenth. A pre-approval is the traditional route taken by homebuyers to convey to a seller that they are a serious homebuyer, but a loan commitment takes the pre-approval process a few steps further…and ups the ante.

The Pre-Approval Process vs. Loan Commitment Process

To get a pre-approval letter, a lender will run your credit score and compile a loan application with the information you provide regarding income, employment history, assets, etc. Your lender analyzes this information and issues a decision on whether or not you are eligible for a loan. If you are qualified, your lender issues a pre-approval stating your qualification subject to the verification of income, assets, etc.

When you choose the loan commitment route, your lender will ask for various documents to verify the information you gave them, such as tax returns, pay stubs and W-2’s. Once verification is completed, your lender can issue a loan commitment which indicates the amount of money to be loaned, the interest rate that you qualify for*, type of loan and period of time for which the commitment is good.

Why You Should Go Beyond a Pre-Approval

A loan commitment essentially means your lender is committed to loaning you the money for a home purchase, pending an appraisal. As a buyer, a loan commitment allows you to:

  • Present the best offer on a property. In multiple-offer situations, a loan commitment shows sellers that you are a serious buyer and have the means to purchase.
  • Gain peace of mind. The process of buying a home and applying for a mortgage can be emotional, even stressful. Obtaining a loan commitment means you have a reliable commitment from your lender, even prior to finding a home to purchase.
  • Act quickly. Having your loan ready prior to finding a home allows you to expedite the loan process, which is also a major benefit for home sellers.

Shopping for a home with a pre-approval is better than shopping without, but a loan commitment gives you a significant head-start against other buyers and has the same power in a multiple-offer scenario as a cash buyer.

To learn more about getting a loan commitment, contact one of our mortgage bankers. If you’re buying your first home, download our free Mortgage 101 Handbook for everything you need to know about buying and financing your first home.

Download: Mortgage 101 Handbook

Apply For a Mortgage

* This is a qualified rate not a locked rate, they are subject to change based on the market at the time you find your home to purchase.

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