Hawai‘i draws people from all over the world with its natural beauty, incomparable climate, and laid-back lifestyle. There’s no question that it’s one of the most desirable places to live in the United States. With a bustling real estate market, obtaining pre-approval from a lender on your mortgage is just smart business. In this competitive market, homes sell quickly, and often for more than their listing price. Approval, before you head out the door to explore the gorgeous neighborhood or island of your choice (they each have their own special appeal!), has a few important benefits. Not only does it give you a rock solid idea of what your buying power is, it can give you peace of mind. It can also give you a significant advantage in the Hawai‘i real estate market, no matter what island or slice of paradise you choose to call home (or your home-away-from-home).
We talked to lending experts and our own team of real estate professionals to find out why. They explained that the first reason is speed. Getting pre-approved for a mortgage accelerates the loan process once you place an offer and it has been accepted. It means you’ve already completed several of the more laborious steps — the heavy lifting — at the outset. Now that you’re entering into a contract, closing your loan and the sale is much more likely to be fast and stress-free.
To use a cooking analogy, think of it like setting your dinner table long before the gourmet meal you’ve been sweating over a hot stove for is ready to be served. Your perfectly prepared opakapaka won’t get cold while you’re making sure you have enough clean wine glasses for all your dinner guests. Not a cook? Okay, let’s try a sports analogy. It’s like polishing up your golf clubs at the end of a round of golf, so you don’t have to worry about them in the wee hours of the morning, right before your next tee time. Same goes for waxing up your surfboard, so you don’t have to do it in the dark before dawn patrol.
With a pre-approval, some of the nitty-gritty work has already been done before you’ve entered into a contract on your tropical dream home, and before escrow even opens. Whether you’re looking at a well-priced home, a condo with a motivated seller, or a place to call your own in a really desirable, notoriously low inventory, beachside neighborhood — where homes get snatched up faster than a box of hot malasadas at the office BBQ — you’ll have an edge over other buyers making an offer on the same home.
This is great news, because after all, you’ve already decided it’s the ONE for you, right? Like the perfectly fitting Vera Wang wedding dress, once you’ve tried it on, it’s hard to go back and choose a lesser dress. It’s the same feeling when you’ve fallen in love with the perfect home. It’s hard to wrap your head around your second choice, so pre-approval helps keep disappointment at bay.
The third advantage is that having a pre-approval in hand when you are house shopping also means there’s a level playing field between cash offers and financed offers. So if another buyer shows up with a suitcase full of cash, you’ll still be in the running for the house you want. Cash buyers aside, our team of lenders also pointed out that if you’re making an offer on your dream home at the same time as other potential buyers who haven’t been pre-approved, but who also need financing, your offer might hold more appeal in the eyes of the seller. With a pre-approved mortgage, the seller already knows that your offer has been qualified by a lender, and that a deal made with you has a higher chance of closing.
The final reason cited by our team of experts was closing time, but when we started singing the 1998 song by Semisonic, they quickly set us straight… “Pre-approval means faster and smoother closings — the two things usually of greatest interest to sellers, thereby making your offer more attractive”. Makes sense, we replied, after we stopped humming.
In general, lenders and brokers told us that the process for a pre-approval takes a little more time and energy up front. A lender will typically look at your income, your credit rating, and your assets. But once an offer has been made, they’ll simply need your most recent pay stubs and a few other small items to make the deal happen. Several lenders told us that it’s their practice to always seek pre-approval over simply pre-qualifying interested home buyers. They appreciate the speed of execution that a pre-approval can sometimes mean. Since most of the work is accomplished up front, it saves time for the seller, the buyer and the realtors involved.
Ultimately, in a competitive marketplace like this one, we recommend that the pre-approval process before you set out on your house-hunting journey, and we’d love to help you find the perfect home for you and your family. To sum up, here are 5 reasons to seek out pre-approved home financing:
- You know your buying power
- Speed of execution
- A level playing field with cash buyers
- It makes your offer more appealing to sellers
- Smoother and speedier closing time
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