Real Estate Tips & Resources
What is the difference between a preapproval and a cash approval?
In today’s blog, we speak with Accept.inc’s Approval Strategy Manager and mortgage expert, Ben Maez to find out what the difference is between a traditional mortgage pre-approval and an Accept.inc cash approval. Let’s look at the different levels of approval in a traditional mortgage process and how that compares with Accept.inc’s cash approval process. Traditional financing step 1: Prequalification What does a traditional mortgage prequalification look like? The first step is simple: discuss your financial information with a loan officer. A prequalification means you as a homebuyer have discussed your finances with a loan officer who has determined based on a quick phone call (approximately 15 minutes) and other factors such as your job history, cash in the bank and amount of financial reserves, that you are likely to qualify for a mortgage to purchase a home. Basically, the loan officer is making an educated guess based on a short series of general questions that you will qualify for a mortgage. How long does a prequalification take to complete? A prequalification can happen the same day. When does a prequalification happen? At the very beginning of your loan application; it is the first step to securing a traditional mortgage. Who influences how fast a prequalification takes? The buyer or the loan officer? A prequalification moves as fast as a loan officer’s speed in setting up a call. As the buyer, you need to be available for the call and ready to provide accurate information. Traditional financing step 2: Preapproval What does a traditional mortgage preapproval look like? The second step is to get preapproved. A preapproval means that a loan officer has received, reviewed, and discussed the following information with you: A copy of your credit report to review your credit score and history Proof of income Proof of assets to verify you have the money set aside for items such as down payment and closing costs If you submit the requested documentation immediately, a preapproval from a loan officer can happen as fast as the same day. By reviewing your income documents and paystubs, a loan officer can get a sense of how stable or consistent your income has been. This also indicates whether you are likely to earn a stable income in the future. Your bank statement and other financial accounts confirm your ability to put enough money towards a down payment and closing costs. Because the loan officer is reviewing these documents, a preapproval is a stronger level of approval than a prequalification. How long does a preapproval take to complete? A preapproval can take as little as 24 hours from the time requested documents are received. When does a preapproval happen? After you have completed your prequalification and provided preliminary financial documents. Who influences how quickly a preapproval can be issued? The buyer or the loan officer? The buyer and the loan officer. As a buyer, the faster you submit all your financial documents, the faster the loan officer can start reviewing. After that, it’s down to how fast the loan officer reviews your documents and lets you know if there are any additional documents they need to complete the file package that will be sent to the underwriter for review. Traditional financing step 3: Underwriting What is mortgage underwriting and when does it happen in the transaction for a traditional mortgage? The final stage in traditional financing is getting underwriter approval. After you go house hunting with either a prequalification or preapproval letter and you have won an offer on a home, you will be ready to move into mortgage underwriting. In this stage, an underwriter thoroughly evaluates the financial documents in your file that a loan officer used to pre-approve you, verifying that all information is current and accurate. When the underwriter reviews your file, they might request additional documents or verification of items. It’s important to note that a mortgage underwriter is the ultimate authority in evaluating credit worthiness. After they give their thumbs up, the underwriter can move you on to closing. How long does underwriting take to complete? Most lenders will tell you that from the time you turn in your documents, you can expect the underwriting portion will take 3-7 days to complete. After the initial underwriting review, there will often come a request from the underwriter for additional documents needed from you to satisfy loan conditions. When they request additional documents, this will extend your timeline for getting underwritten approval. When does underwriting for a traditional mortgage happen? Traditional mortgage lenders send your file to underwriting only after you have won an offer on a home and gone under contract. This means you must first apply for the loan, submit all financial documents, win an offer on a home, complete an inspection, resolve any additional negotiations with the seller and satisfy any other contingencies before your file is considered complete. According to Ice Mortgage Technology’s Origination Insight report, traditional lenders currently need an average of fifty-one days from the time you begin your loan application to the time you close on the home. Who influences how fast a file is sent to underwriting with a traditional lender? The lender decides when your file is ready to be shared with underwriting. Cash approval What does a cash approval look like? An Accept.inc cash approval is simply one step: full upfront underwriting. What can take traditional mortgage lenders 48 + days to process, Accept.inc can process in 72 hours. With an Accept.inc cash approval, the mortgage underwriting stage is completed upfront before you go shopping to minimize surprises at the end of the transaction. Sellers hate last-minute surprises after they have gone under contract with a buyer. A full upfront underwrite means that you are able to shop with the power of cash, backed by a loan you have already been fully approved for. Accept.inc’s cash approval process is designed to accelerate your approval timeline. As you begin the cash approval process you should expect to take a thorough deep dive into your finances immediately, the first day you apply. You should plan on a series of conversations with your approval specialist to assess what specific documents are needed to verify all income, assets and debt. How long does cash approval take? Cash approval can happen in as little as 72 hours. When does cash approval happen? Cash approval starts as soon as you decide to apply and finishes after all financial documents requested by the approval specialist have been sent to underwriting and your file has been underwritten. At this stage you will know the home purchase value you are approved for. If you want to submit offers on homes with a cash approval letter you should apply before you start shopping for homes. What is the most important part of the cash approval process? The most important piece to getting cash approved is also the most cumbersome part for you as a buyer: collecting documents for your loan application so it is ready for the underwriter to approve. Your approval specialist will guide you step-by- step, document-by-document through what is needed for your specific financial situation. With both traditional financing and cash approval, you should expect several rounds of requests for documents that verify your finances. Yes, that’s right: several rounds. The first round will be a general submission of standard documents. Additional rounds that follow will be more custom-tailored to the specific items in your finances that the lender has identified. Because each loan applicant is unique, there is no set standard to how many rounds of documents you will need to submit. Remember: submitting multiple rounds of documents can happen when working with a traditional lender or Accept.inc. It’s important to note that some buyers with more complex financials, such as those who are self-employed or who have multiple streams of income or many assets such as multiple properties should be prepared to submit more documentation. With traditional financing, lenders will give you weeks to submit your complete documentation. But cash approval is different. Accept.inc’s mortgage team is prepared to move as fast as our buyers can submit their documents. This is also where many buyers may lag in their response time. What is considered too long of a response time? Well, that depends on how fast you want to win a home. In today’s hypercompetitive market, many buyers face the challenge of homes selling within days of coming on the market. If you wait to finish your cash approval until you find a home you like, you risk missing the window for submitting an offer that is backed by cash. Who influences how fast cash approval takes? The buyer. Why? Because Accept.inc’s cash approval process is designed to empower buyers to fastrack their file through the same vetting process a traditional loan takes -but, in a fraction of the time. Traditional loan preapproval or cash approval: which one is for you? Getting approved for a home loan requires you to commit to a process and timeline whether you work with a traditional lender to get preapproved or Accept.inc to get cash approved. With cash approval you get more than just underwritten approval, you get all-cash buying power which is 4x more likely to win an offer for a home. Preapprovals tell you that you can “probably” qualify for a mortgage to buy this house- but cash approval gives you and the seller 100% certainty that the cash will be ready on closing day. To start the cash approval process with Accept.inc, just fill out this quick form.
Jennifer Shapiro | Aug 21, 2021
How to successfully compete with an all-cash offer on a home
As a homebuyer in today’s hot real estate market, you’re facing some fierce competition. So, we don’t blame you for feeling a tad overwhelmed – or even discouraged – especially if you’ve lost a number of bids to all-cash buyers. Wondering how you could possibly compete with an all-cash offer? The answer is simple: the secret to beating a cash offer and walking away with the keys to your dream home is to make a cash offer yourself. You don’t need to have a net worth that rivals Jeff Bezos or Jonathan and Drew Scott from HGTV’s Property Brothers to be able to make a cash offer on a house. Here’s how everyday buyers are doing it, too. Compete with an all-cash offer by making one yourself We know what you’re thinking: How can you compete with an all-cash offer if you don’t actually have the cash to do so? Accept.inc is an iLender who makes it possible for regular people who qualify for a mortgage to make an all-cash offer even if they don't have hundreds of thousands of dollars lying around. You can secure the funds by getting Cash Approved™ – which will provide you with the upfront liquidity needed to make an all-cash offer, backed by an Accept.inc mortgage. You’ll reap all the same benefits of a cash offer – like a competitive edge and a speedier close – but without the need for upfront liquidity. Traditional mortgage lenders don’t initiate the underwriting process until a home is officially under contract. Through Accept.inc’s Cash-Approval process, however, underwriting is performed upfront. That means you’ll be fully mortgage-approved (really approved, not "pre-approved"!) before ever submitting an offer on a home AND you’ll have the strength of cash in your back pocket. Similar to how a 0% credit card works, we front the funds for approved borrowers to make their own all-cash offer with no additional costs or hidden fees. This allows you and your real estate agent to shop the housing market and negotiate with sellers using the power of cash. And when the deal is done, you pay back the borrowed funds over time just like you would with a traditional mortgage. Have a knowledgeable real estate agent by your side A licensed real estate professional serves as an advocate for your interests – working on your behalf to find you a dream home that fits both your budget and needs. They’ll have invaluable knowledge about the local market, providing insights on neighborhoods and school districts while helping you understand any paperwork or confusing jargon that may sound like a foreign language to you. What’s more, you can lean on an agent’s expertise to write a competitive bid and negotiate with the seller. Real estate agents understand what truly matters to today’s sellers. By understanding what motivates the seller, you can draft up an offer that caters to their specific needs. For example, maybe they’re looking for a quick and seamless transaction. Or, maybe they prefer to deal with as few contingencies as possible. Know your numbers, so you can move fast The perfect home has caught your eye -- it's everything you want and need. But before you break out the champagne, there's still a lot that needs to happen before you can win the bid. You don't want to lose out on the perfect home because you were too slow to present your offer. In a hyper-competitive market, that means you have to know what you plan to offer as soon as possible, which means you've already done all your homework ahead of time. Factors to consider: What's your budget? And how much do you need to bid to win? In terms of affordability, a good rule of thumb is the 30% rule, which says you should spend 30% (or less) of your gross monthly income on house-related costs. But savvy home buyers know it’s important to crunch the numbers to know specifically how much your monthly costs will be and how that fits into your larger budget. (Here are some pro tips for calculating your total monthly housing costs.) If you've been working closely with a real estate agent, you should already have a sense of whether homes in your market are selling below, at, or above listing price in your desired neighborhood. So work with your agent to come up with a good number, put in your offer quickly, and be sure to let the seller know you have cash on hand! Get cash approved ahead of time While traditional pre-approvals are quick to obtain, they don’t provide much certainty because the lender can still decide to deny the loan later in the process. To give the home seller true confidence that your offer won't fall through due to financing issues, you’ll need to get fully underwritten upfront. That's what getting a mortgage through Accept.inc does. Taking the financing contingency out of the equation is one of the biggest differences between a Cash Approved™ buyer and one who is simply pre-approved. Crafting a winning offer and boosting your confidence while house hunting ultimately boils down to being able to make the best offer, not necessarily the highest offer. Gain a competitive advantage in this seller's market by having full proof of funds in the bank and being able to move quickly, just like those other all-cash buyers who have been snapping up homes from under everyone's noses. Get Cash Approved today and improve your chances of scoring your dream home by 4X.
Kelly K. | Aug 4, 2021
Home Selling Resources
3 Benefits of Accepting a Cash Offer When Selling Your Home
We get it: selling a home takes the cake as one of the most difficult (and stressful) financial experiences we can face over the course of our lives. From having to navigate challenging contingencies to worrying if your sale will close quickly and seamlessly, the selling process can be pretty overwhelming...to put it lightly. Whether you’re anxious about the possibility of a long, drawn-out process or you’re worried about the costs associated with selling a home, you’re not alone. As you know, when a deal falls through, you have to re-list your home. And when you relist your home, prospective buyers often assume there’s something wrong with the home, which can make it take even longer to get a new offer and, ultimately, cash in your bank account. As a seller, there are three major benefits to accepting a cash offer on your house. There are a number of advantages to accepting a cash offer instead of working with the approximately 86% of buyers who pursue a traditional mortgage. And in a hot real estate market, an all-cash offer doesn’t necessarily mean having to accept an offer below-asking price or dealing solely with institutional buyers. It’s a common assumption that all-cash home purchases are a rarity. However, they account for a pretty healthy portion of property sales – representing 36% of home sales in 2020 alone, according to Realtor.com. From a speedier close to cost savings, here’s a look at the three biggest reasons to consider an all-cash offer on a house. Benefit #1: Cash Offers Close Faster Maybe you’re relocating for an employment opportunity. Or perhaps you’re expanding your family and upgrading to a larger home. Whatever the case may be, by accepting a cash offer on a house, you’ll speed up the process of getting your house sold. Sellers prefer cash offers because selling a home through a traditional mortgage lender is time-consuming, taking an average of 47 days to close (according to Ellie Mae). The culprit? Lenders require a lengthy underwriting process at the end of the sales process. With an all-cash offer, the average time to close is approximately 2 weeks. Between the initial pre-approval and the loan finalization, if a buyer’s financial picture changes, or they fail to satisfy certain requirements, the lender can decide to decline their loan. The result? Your deal will fall through and you’re left back at square one of the selling process.Benefit #2: Cash Offers Eliminate the Risk of Financing Falling Through Month over month, NAR’s Realtors® Confidence Index continues to list “issues related to obtaining financing” as the primary cause of delays or terminations of real estate contracts. From buyer financial troubles to third-party appraisals, several things can cause lender financing to be at risk. If the buyer is unable to secure a traditional mortgage at all — or for the amount they "pre-qualified" for — they won't be able to purchase your home. As a result, you'll either need to pursue the next offer in your pipeline or place the house back on the market. Best case scenario: it's a hot market and the whole process starts all over. Worst case scenario: the market softens and it takes longer AND you need to lower the listing price. But if you're presented with a cash offer, you don't have to anxiously chew down your fingernails, worrying that the deal could collapse at the 11th hour because of financing problems. Benefit #3: You Won’t Lose the Deal Over an Appraisal Contingency Another way a traditional mortgage lender can kill your sale is via an appraisal contingency. An appraisal contingency is a clause that states the contract can be terminated if the seller’s asking price isn’t consistent with the assessed market value of the house. An appraiser’s evaluation combines tax records, prices of comparable homes recently sold in the local area, a personal assessment of the property’s condition, amenities and features, location in the neighborhood and several other considerations. If your home doesn't appraise at the list price or higher, the lender can refuse to approve the buyer’s mortgage loan. Or, the lender may agree to finance the home, but the buyer would be responsible for fronting the difference. Oftentimes, buyers don’t have the financial means or are unwilling to cover the difference. If that's the case, the buyer can rescind their offer. When you receive an Accept.inc offer, however, you'll have confidence the house has already been offer-checked and the sale is approved for the amount of the offer. Enjoy the Benefits of a Cash Offer on Your House From neighborhood parties to engagements to a baby’s first steps, your home is not only a reflection of you, but it’s also where priceless memories are made. What it shouldn’t be: a source of stress and anxiety when it comes to the home selling process. We founded Accept.inc as a way to introduce a better kind of mortgage lending to the market – one that gives everyday homebuyers the power to buy a house with cash. As a seller, this translates into a streamlined process that solves many of the problems associated with the old way of getting mortgages. Helping you sell your home 3x faster than the national average and avoiding deals from crashing and burning is what we’re all about. Because having to relist a home is certainly not our definition of fun, and we’re guessing it’s not something you want to experience either. All you’re responsible for is accepting the strongest all-cash offer in real estate! To learn more about the benefits of partnering with Accept.inc, download our free Seller Information Packet today.
Kelly K. | Jul 27, 2021
All-cash offers and contingencies: what you need to know
As Elvis Presley infamously sang, “Home is where the heart is.” The line often resonates deeply for both home buyers and sellers who are on the cusp of taking the next step in their homeowner journey. But, did you know even after an offer has been made and accepted, a contingency can extinguish the entire deal at the last minute? That’s certainly heartbreaking for all parties involved. In real estate, a contingency, also known as a “walk away” clause, refers to the conditions that must be met in order for the purchase or sale of a home to become legal and binding. For instance, in NAR’s monthly Realtors® Confidence Index report, “issues related to obtaining financing” continually leads the pack as the primary reason for the delay or termination of a real estate contract When buying a house with cash, however, there’s no financing contingency baked into the contract – eliminating the risk and heartache of the deal falling through. So, what common contingencies should you know about? In what ways can they protect you? In what ways can they increase the risk of a deal falling through? And how do cash offers impact real estate contingencies? Here’s what you need to know. Financing contingency A financing contingency states that the home sale is dependent on the buyer securing the expected mortgage. No financing approval, no contract. Closing a loan traditionally is a lengthy process, taking an average of 47 days to complete, according to Ellie Mae, the software company that processes 35% of U.S. mortgage applications. During this window, a deal can fall through due to financing at any time. Buyers and sellers alike can think the sale is a done deal, only to be notified of a financing problem on day 46 under contract. When instances like these occur, the financing contingency allows buyers to retract their offer without facing any penalties. No one wins when the buyer's financing falls through. For sellers, the challenge of the financing contingency is having to wait to find out if the deal will fall through, in which case, the seller will be forced to start from scratch and find a new buyer all over again; placing their home back on the market and fielding added expenses that arise from the failed sale. Often, the home also has to be listed at a lower price due to a stigma placed on homes that fall out of contract, regardless of the reason. Buyers aren't immune to wasted money and time either, facing their own frustrations of losing out on their dream home. And real estate agents can't get paid until their clients make it all the way through the sales process. Using an all-cash offer, however, there’s no financing contingency on the table. That's because a cash offer means the buyer has full proof of funds ready and loaded when they make the offer. Buyers who are Cash Approved™ -- not just "pre-qualified" or "pre-approved" -- pose no risk of falling out of a deal due to a financing contingency. Home sale contingency When a buyer’s offer is contingent on successfully selling their existing home first, that means the offer has a home sale contingency. Like the financing contingency, a home sale stipulation can stall the entire purchase process from moving forward. This type of contingency can be found in both financed and cash offers. In a hot market, home sale contingencies may not be as common since buyers don’t want to risk making their offer less attractive and have fewer concerns about being able to sell their current house. However, if you're a buyer who needs to include a home sale contingency, making a cash offer -- by getting Cash Approved™ for example -- is often a good way to go because cash gives you more negotiating power than a traditional financed offer. Appraisal contingency Another condition that can sour a deal is the appraisal contingency. After a seller accepts an offer, a traditional mortgage lender will require a property appraisal to ensure the asking price coincides with the market value of the home. From the condition of the property to renovations to tax records, if an appraiser’s assessment determines the market valuation is below the asking price, the lender can deny a buyer’s loan application after the offer is already made. If the mortgage lender agrees to move forward with financing in this particular scenario, the buyer would be accountable for paying the difference out-of-pocket. Most buyers don’t have the liquidity to front the difference, and the appraisal contingency allows them to terminate their offer without forfeiting their earnest money. Similar to the no-financing contingency, appraisal contingencies can be removed in an all-cash offer. But you don't need to be a billionaire with deep pockets to make a cash offer on a reasonable home. At Accept.inc, we want the mortgage process to work for everyday people -- what a radical concept! To speed up the closing process, we perform a value check on a home at the beginning of the home buying process – before an offer is made – rather than in the final hour like a traditional mortgage. That means no nasty surprises to torpedo the deal in the final hour. All-cash offers and contingencies In today’s supply-starved real estate market, homebuyers are seeking ways to make their offer stand out from the crowd. Bidding way above the asking price isn't the only way to do that -- fewer contingencies is another reason why sellers prefer a cash offer. Cash buyers represented 36% of home sales in 2020, according to CNBC. So, how can one go up against these Goliaths with easy access to millions of dollars in cash? The secret lies in aligning yourself with a lender who will let you negotiate with the power of cash, but with the ability to pay the money back over time like a normal mortgage. Interested in making a cash offer on your next house, with no financing contingencies and no additional costs, increasing your likelihood of making a winning offer by 4X? Learn how to get Cash Approved™ today!
Kelly K. | Jul 22, 2021