Real estate agents will advise you that it is much better to have a preapproved loan letter than to be prequalified for a loan. A preapproval letter for a loan is a letter from the lender that expresses confidence in the borrowers’ ability to payback the loan. The lender would consider credit, employment and bank references in establishing this ability. While prequalification only suggests the borrower is credit worthy.

The advantages of a gaining preapproval:

You can now look at homes that are within your budget - Ask your real estate agent to send a list of homes that are within your range. This way you are not wasting time looking at homes that are unaffordable or below your budget.

Gain confidence - Now you can be confident your dream home is yours, because no one can disqualify you at any point during the transaction.

Increase your bargaining and negotiating power - The seller will be more likely to accept an offer from you because they know that you are able to buy the property and you are a secure candidate. This can also mean that if your offer is lower than others are, you may still have a better chance in being the candidate of choice.

Faster sale - Since most of the processing procedures are complete, the lender can give you the funds you need faster. This means that you can start living in the home of your dreams quicker.

The short sale is a situation that occurs close to the early stages of a foreclosure. A lender allows the homeowner to sell the property for less than the amount of the outstanding principal on the mortgage.

Biggest Benefit is Time-Sensitive

The lender will accept proceeds of the transaction and may forgive the remainder of debt. Sounds so easy and uncomplicated – and sometimes it is. To achieve maximum benefit from a short sale, you need to have the following information at the tips of your fingers:

1) Know the current value of your home. Never rely on old information.
2) Make a list of all liens against your property. Concentrate on anything that needs resolution before you can produce a clean title at the closing.
3) Analyze the costs you will incur if you sell the house yourself against the costs of using a real estate broker.
4) When you add all liens, loans and costs and subtract them from the expected sale proceeds of the house, the result should be a negative number. This is the reason for calling this a short sale.
5) Keep communication lines open between you and your lender. Talk to your loss mitigation officer frequently. This person needs to understand your situation.
6) Be open to solutions that your lender may offer you. You may qualify for a loan modification or refinance – unless time is short and you really need to sell.
7) Never drag your feet. Timelines are important and your clock is ticking.

Best Benefit: Clean Slate

A buyer is not part of negotiations with the seller’s lender. Upon closing, the buyer moves in and the seller moves on.

Lenders usually report this transaction as “paid” to credit bureaus. Some might add “settled for less than owed.” It sounds negative, yet it is better than reporting a foreclosure. That could follow you around for up to ten years.