The Need for Loan Pre-Approval
It seems natural to find the home you want to buy first, and then deal with financing second. What you should know is, you run the risk of loosing that home if you don't get your financing prequalified first.
Why get prequalified for a mortgage before you begin your search for a home? Because you, your agent, and the seller from whom you are trying a house from will benefit from it.
The most important benefits, of course, are for you. The most common question Real Estate Agents get from home buyers is, "how much house can I afford." There are many variables--credit history, income, debt, and special mortgage programs--to keep an agent from answering that question with a simple answer. The only true way of getting the question answered is through prequalification.
The loan prequalification step is a simple one, but it is an extremely important one. It begins the process of formally applying for a mortgage, and it gives everyone involved--especially you--a clear idea of what you are capable of buying.
By knowing what your financial parameters are, you and your Real Estate Agent can spend more time looking for houses that fit you and avoid looking at houses you can't afford to buy. Keep in mind, no matter how much you might desire a 5000 square foot home for $350,000, if your qualifications say $200,000, then what you will ultimately be able to get will be a $200,000 house regardless of how many $350,000 houses you look at or put offers on.
This brings us to the seller of the home you want to buy. Imagine you find a home you want to buy, but the seller has offers from other buyers. A prequalification will strengthen your bargaining position over other buyers who don't have it because it tells the seller you really have the ability to buy their home. Put yourself in their shoes. Would you take the chance on the buyer that perhaps may not be qualified?
How do you get Prequalified for a loan?
The first step is to see a lender and get a letter of pre-approval. This pre-approval letter will be granted after the lender has run a credit report and perhaps asked you for various documents including tax returns, a list of loans and credit cards you might have, as well as paycheck stubs and documents about your employment and pay.
Once you have received loan pre-approval, the loan must be processed and then be underwritten to guarantee you a loan. These are different departments within the bank, so it will take time to complete this process. The processing department must order appraisals, title work, and verify employment. The underwriter must make sure that your loan meets the requirements for the particular loan program you are using. So you know, problems with loans often can be traced to buyers not submitted the necessary financial items and paperwork in a timely manner- so make sure to keep on top of this or else you run the risk of loosing that home.
Suggestions and Advice
When you are purchasing a home and going through the loan process, it is best not to purchase any major items including appliances, cars, or apply for credit cards or other lines of debit. Even small debt can throw off the ratios used by the lender to grant your loan, and you may suddenly find you no longer qualifing.
If you receive money and put it into your account, or if you transfer money from one account to another, it is important to keep a paper trail to explain where the money came from or where it went.
Get Prequalified and Pre-Approved Now!
Thinking about buying a home? Then you need to be prequalified and pre-approved for a loan first. Get prequalified now by simply filling out the form below. A loan officer will contact you to collect the information they need to get your prequalification process started. You will then be on your way to the home of your dreams!
Yes! Please start my prequalification process!
