After finally saving up enough money to use as a down payment, I decided that it was time to hit the market. I met with a lender, got pre-approved for a loan, and then started visiting different properties. However, I quickly realized that I didn't know as much about real estate as I would have hoped. I wanted to find a great neighborhood and know what to ask the professionals, but I could tell that I needed a little help. To point me in the right direction, I started working with a great real estate agent who was familiar with the area. This blog is all about educating the general public on real estate matters.
Those about to enter the realm of home-buying are usually advised to find out how much home they can afford as the first step. In the past, many potential buyers were advised to multiply their income by 2.5 times to come up with a home loan price that is likely to meet with a lender's approval. Buyers can get more exact information than that, however, by applying for what is called a loan pre-approval or a pre-qualification. These applications are different than applying for a loan once you have made an offer on a home. Read on to find out more about these initial financing moves and how they prepare buyers to make good home-buying decisions.
First Up – Pre-qualification
It's important to focus your home search parameters on homes that you are most likely to afford. That is what a mortgage pre-qualification will do for you. It provides you with a range of numbers based on your income and other debts. The pre-qualification process is more informational than a hard check, however. It's based on what you tell the lender and nothing is verified. You can do yourself a favor by being as precise as possible with your income, debts, monthly obligations, employment history, etc. If you have some down payment money ready to go, be sure to figure that into the equation and let the lender know about it. The result of this inquiry is a letter from a lender that states a mortgage range that you might be approved for if all information is valid. It is not a loan promise or approval, however. By the way, with a pre-qualification or a pre-approval, you are not obligated to use the same lender when it's time to apply for the loan.
Next, Get Pre-approved
A pre-approval is the in-between step for buyers that need more confidence when it comes to how much home they can afford. Some buyers may skip this step and go right to the loan application but a pre-approval can give certain buyers a higher level of information about a potential loan approval. With a pre-approval, applicants will need to supply proof of employment, bank accounts, down payments, and more. A big consideration when it comes to this move is the credit check. Pre-approval applications involve a credit check and it is considered a hard inquiry. However, it almost guarantees that your loan will be approved as long as nothing changes in the near future.
Both of the above moves show the seller that you are a serious in your search for homes for sale and are ready to close the deal. To find out more about the above issues, speak to a friendly mortgage lender in your town.Share