It is common for people selling real estate to demand buyers obtain pre-approval for a mortgage before the sale can go forward. This is so important, in fact, this term is often explicitly written into a real estate contract as a contingency, which can bring a sale to a halt if the buyer fails to keep their end of the bargain. But why do sellers demand pre-approval for financing on a mortgage, and what may happen if they do not?
What Does it Mean to Get Pre-Approval on Financing?
When someone gets pre-approval on financing for a mortgage, they are effectively asking a bank or mortgage lender for approval on a mortgage for a house they have not yet purchased. The process of obtaining pre-approval is very similar to obtaining a mortgage, where the lender will examine a buyer’s credit history to determine how much money they are willing to lend. Once the process is complete, the buyer is given documentation showing whether the bank would approve the mortgage or not.
Why Do Sellers Require Pre-Approval?
Sellers often require prospective buyers to obtain pre-approval on a mortgage because it acts as a kind of safeguard for the purchase of real estate. Banks are able to conduct a thorough examination of a person’s financial history to make sure they are actually able to pay for the purchase. Moreover, they are better equipped to determine if any financial information is fraudulent, safeguarding against potential scams.
What Might Happen if They Do Not Require It?
When sellers choose not to require pre-financing on a mortgage, they place themselves at increased risk that the deal will end badly for them. It is possible, for example, for a buyer to wind up not having enough money to go through with the purchase, wasting the seller’s time with a sale that was never going to happen. It also puts them at a higher risk of falling victim to scams based on fraudulent or forged documents.
What Should You Do?
In order to protect yourself from potential legal issues in any real estate transaction, you should always make sure to hire a lawyer with experience handling real estate law. They can go over your contract with you to make sure it suits your needs, and point out potential loopholes that could harm you later on. The sooner you call, the sooner they can get to work for you.
For more than 50 years, the New York lawyers at Elovich and Adell have represented clients like you in real estate cases. Our attorneys, conveniently located in Long Beach, handle personal injury, real estate, commercial transactions, criminal defense, and labor and employment claims all across New York State. For a consultation, please call us at 516-432-6263 or visit our contact page for more information.
