Congratulations! You have decided to be a homeowner! Have you done your due diligence? Are you ready to make a serious offer? Well, it is time to get pre-approved in 3 easy steps.
If you are financing your home purchase with a mortgage, you need to get that pre-approval letter. For one, it establishes your home buying budget, and tells your agent you are a serious buyer in a competitive housing market. Besides, most sellers will not even consider your offer without it.
If you need to sell a home before you buy, please do use this free Home Valuation service. Keep reading to learn how to get pre-approved in 3 easy steps!
QUICK REALITY CHECK
When you apply for a mortgage pre-approval, you need to take into account, it can show a hard inquiry on your credit report and may impact your score. Usually, the impact happens when you agree for your credit to be pulled by the lending institution. But this is why you need to be careful, make sure to request a soft pull only, and request a breakdown of all the fees and estimates of the loan and closing details.
Think you can do without it? Snap out of it! Yes, a preapproval may have an impact on your credit score, but there is just no way around it. This little piece of paper, might be the most important step in the home buying process, when financing. If you are serious about buying a home, do not skip this step. Otherwise, you are fishing in the dead sea.
Still think you do not need to get pre-approved? Not to pour salt on the wound, but this is a sellers market. And even though there is no certainty in tomorrow, today is all we really have. Market stats indicate, even though it is definitely a sellers market, mortgage interest rates are still historically low. And due to a recent geopolitical conflict, they are expected to stay low, for now. But sooner or later, with rising inflation, the FED will have to raise rates. Therefore, now is really the best time to buy.
Get pre-approved in 3 easy steps! Here is what you need to do:
STEP 01: CHOOSING YOUR LENDER
Choose the right lending institution for your type of mortgage. Make sure you discuss all your available options before you apply. Crunch the numbers yourself, or get a financial advisor to do it for you. But find an optimal financing solution, that will put you a step forward to your dream home.
Do not just go to the first option you get from an online search. Shop around. Ask your REALTOR® for their trustworthy recommendations. Go with a reputable local lender. After all, they know their community, and they have been doing this all day, every day for homebuyers just like you.
Also, know that you do have a grace period, in which you have the right to shop around for lenders, without it impacting your credit score further than the first pull.
If the lender is truthful and forthcoming, they will disclose any and all information to you in writing. Especially, when it comes to buying points. Because that’s how some lenders will try to get you!
Therefore, choose a property that you are initially interested in, and have the lender send you an estimate with all fees and closing costs in writing. This would be a good estimate for you, and you will be able to see the lender’s fees, rates and any points they may have applied, to be able to offer you that enticing low rate . Beware of lending institutions that may offer you a lower rate. That may come with a price! Don’t take the bait. Run the numbers.
STEP 02: GET PRE-APPROVED
Fill out a mortgage loan application. Your lender will usually give you the option to complete your loan application online, over the phone, or in person.
Your lender will ask you for documentation to support the information in your loan application. This is what makes getting pre-approved different from getting pre-qualified. A pre-approval letter gives you verified home buying power, whereas a pre-qualification letter only estimates your home buying budget without actually verifying your eligibility.
STEP 03: PRE-APPROVED VS. FINAL APPROVAL
Today, most lenders use a universal automated underwriting system (AUS), to pre–approve customers for a home loan. This AUS process provides a computer–generated loan decision. But when it comes to your final approval, it has to actually go through the underwriters, who might ask for more documentation and probably cause you additional stress. But hey, it is all a part of the process. Keep your eyes on the prize.
What is an underwriter? It’s what keeps you and your REALTOR® up at night through the buying process! Just kidding! But in all fairness, it is the person who evaluates all of your documents for the loan. This includes your pay stubs, W-2s, employment documents, tax returns, asset statements, appraisal, credit report and other financial statements.
In general, it should take about 30 days from accepted offer through the date your loan closes. Bear in mind, this is just an estimated timeline; the process can be faster or slower, depending on different circumstances. Remember, every day you delay delivering any documentation or information to the lender, will result in an automatic delay on your closing date.
Warning! A pre-approval does not guarantee the mortgage. You can still get denied for a mortgage, even after being pre-approved for it. There are a number of reasons this could happen. But basically, anything that significantly impacts your financial status between your pre-approval and loan closing date could change your mortgage eligibility. This is why both your lender and REALTOR® will advise you not to make any big purchase during that time. Unless you are begging for your deal to fall through, a new car can wait!
Another thing is, you need to check your expiration date on the pre-approval letter, and keep it in mind as you look at homes.
Now that you have learnt how to get pre-approved in 3 easy steps, you can move forward with your plans to find your dream home and achieve your real estate goals.
If you are ready now to looking for a primary residence, vacation home, or investment property use this free search service. Happy hunting!