A preapproval should not be confused with the less rigorous prequalification, which provides a quick estimate of what you might be able to afford, usually based on unverified financial information you provide.
In a preapproval, lenders will thoroughly review your income, assets and credit scores to determine exactly how much you can borrow and which loan might be best suited for you. This can take from a few hours to a few days to complete. “You’ll need to provide two months of bank statements, two pay stubs and two years of tax returns,” said Mark Yecies, an owner of SunQuest Funding in Cranford, N.J.
Both Mr. Barry and Mr. Yecies say they provide approval letters for each property a buyer makes an offer on.
Contingency clauses allow buyers to back out of a contract if certain conditions aren’t met. But many sellers see them as road blocks to a sale, and these days they’re far more likely to accept an offer with fewer contingencies or none at all.
The most common is the mortgage contingency, which lets you pull out of a deal if you can’t secure financing for the property. Waiving this, said Angela Dooley, an agent with Compass on Long Island’s North Shore, “could put you in first or second place in a bidding war.” But not everyone should do this. “Only those people who are very, very confident they’re going to get a mortgage,” she said.
Among some of the other contingencies, a contract could be terminated if a home’s appraised value comes in less than the amount you offered, if an inspection uncovers certain repair issues, or you’re unable to sell your current home.
“A very strong offer will waive all of them,” Ms. Gosselin said, “but there will be things you cannot do and that will be OK. For instance, you may not be able to waive the appraisal clause because you don’t have the money to make up the difference,” if an appraisal comes in lower than the sale price.