You Have To Be Pre-Approved To:
–View properties you love.
Many sellers in today’s market will not allow buyers who have not been pre-approved to view their home. Most homes on the market today are owner occupied and homeowners do not want to reschedule their daily lives around buyers who are “just looking”. In the eyes of many sellers, a buyer who hasn’t taken the most important initial step in the purchase process, probably isn’t serious. Today’s sellers are also aware that there are criminals who pose as buyers and will use showings as an opportunity to “scout out” things like the level of security, types of valuables in a home and the presence of a guard dog. It’s an ugly truth, but many wary home sellers are being more cautious, and want assurance before they will let just anyone enter their home. Obtaining a letter of pre-approval from a lender will go a long way towards that end and also ensure there isn’t a delay when you are ready to view a home you’re interested in seeing.
–Make an offer as soon as the perfect home becomes available.
Most educated sellers will require a buyer to produce a pre-approval letter before any offer will be accepted. We have often found ourselves working with buyers who find the “perfect home” but their offer isn’t taken seriously or accepted due to a lack of preparation. We have seen clients miss out on homes they have fallen in love with because another buyer who has a pre-approval makes an offer while our client waits to get theirs. In other cases, we have seen buyers get stuck awaiting pre-approval, leading to a multiple offer situation. A lack of preparation can cost you valuable time and allow other buyers to view and present an offer while you are forced to wait… This is becoming more and more common in our market and if another buyer makes an offer while you are waiting, you will almost inevitably have to pay more than you would have, or worse, you may again run the risk of missing out on the “perfect home” entirely.
–View Properties That Fit Your Budget.
Everyone hates to waste time, and spending hours or days viewing homes that don’t fit within your budget is not only a waste of time but it can be a huge disappointment. Finding out that you can’t qualify for the home you have your heart set on can be a real let down. On the other hand, if you are able to qualify for more than what you think, you may be selling yourself short and settling for something that isn’t quite what you want when you could do better.
–Know What Your Monthly Payments Will Be.
A lender can give you a very close estimate what your monthly payment will be depending on several different factors, such as the loan amount, loan type, your credit score, interest rate, and the amount of years you finance the home. Rates are still at an all time low, so take advantage!
Choosing A Lender
No matter if you’re a first time home buyer or if you’re a home-buying vet, choosing the right lender is one of the most important steps of the home-buying process. Not only are comparing rates and lender fees extremely important, but finding a lender who is available after hours or during a crisis can make all the difference in your home-buying efforts. The right lender can ultimately be the difference between walking away a happy new homeowner, or having your deal fall apart prior to closing!
Many if not most banks and credit unions are considerably slower when it comes to the closing process and good luck getting someone to answer the phone after hours. Unlike a professional mortgage lender who only gets a paycheck if your home successfully closes, loan officers at banks typically get paid an hourly rate or salary whether your loan closes or not. So much for motivation! In our experience, even clients with longstanding banking relationships have frequently received poor service and are displeased with their bank by the end of the transaction. Worse still, the banker that you have done business with for years is usually not the one that handles your home loan! We see this every day and always recommend that our clients deal with a licensed mortgage lending specialist. Feel free to ask us for more details, or follow the link for our approved vendor list. We are happy to get you going in the right direction!
Obtaining financing to purchase a home includes a number of important factors. Lenders, banks and other sources for loans take into consideration a combination of items when determining whether or not to loan you money. When determining your borrower profile and creditworthiness they look at factors like:
• Current income
• Length of time at your job
• Debt-to-income ratio
• Past rent or mortgage payment history
• Your credit report
• Tax returns
• Down payment amount
• Months of reserve money
Your income level, debt and credit information will be used to pre-qualify you for an amount the lender thinks you can afford. However, a pre-qualification is different than a pre-approval. A pre-approval takes into account your credit report, debt-to-income ratio and a more in-depth analysis of your financial situation. Once pre-approved, you will receive a pre-approval letter that can be provided to a seller with an offer.
Once you have identified a property for purchase, and have an accepted offer, the lender will begin processing your loan. They will take into account other factors impacting an approval including items such as:
• The preliminary title report
• Any homeowner or community association dues
• Financial stability of a homeowner or community association
• An appraisal report
• Homeowner insurance payments
• Property taxes
The combination of your financial profile (income, debt, credit, etc.) and the property (condition, value, etc.) gives the lender a complete picture of the risks and benefits of providing you with the loan. Once all these items are reviewed and approved, you will be in the “home stretch” (no pun intended) for closing on your new home!