Let’s talk a bit about mortgage loan pre-approval. Shopping for your dream home should be an exhilarating experience. Many first-time homebuyers jump in to the real estate pool head-first with full steam, but perhaps not enough realism. For many, the all American dream can turn into a heart-breaking nightmare when the house they fell in love with is sold to another buyer who had pre-approval for their home mortgage loan. Before you start shopping for the perfect house, your first step should be shopping for the best financing.
Your credit may prevent you from qualifying for your home mortgage loan. In fact, cleaning up derogatory marks on your credit report could be a lengthy process. It’s best not to begin looking at properties until you know your credit score will help and not hurt your cause. Furthermore, any big-ticket purchases could become obstacles in the loan application process, so avoid buying a new car or new furniture until your loan is completed.
It’s not uncommon for first-time buyers to set an unrealistic budget. Calculating income vs. expenses can be misleading. Not only must buyers account for what they can afford for mortgage loan payments on a monthly basis (in addition to homeowner’s insurance, association fees, property taxes, etc), but the amount of the loan for which you qualify also sets the tone for your home buying budget.
When a bank approves your loan for $200,000, that’s the budget you have for home shopping, unless you’ve stacked up cash to cover the difference. There’s no point in looking at homes you know you’re not qualified to buy.
Pre-qualification for a home-mortgage loan puts you in a power-position where you know what funds are available to you, and what realistic price point you should be considering. It’s important to note, however, that you are not obligated to accept the full amount of a loan offered. Just because a bank qualifies your loan up to $500,000 doesn’t mean you have to take the full amount and shop in a higher price bracket than you’d originally intended.
Keep in mind that closing costs are not typically covered in your home mortgage loan, so in addition to your deposit, even with pre-qualification for your home mortgage loan, you’re still responsible for appraisals, inspections, lending fees, and clerical expenses on the house you purchase.
Not all home-mortgage loans are created equal. Some lending institutions offer lower interest rates while others may require more paperwork. Life of the loan may also vary from one institution to another. It’s important to shop for loans, compare rates, timelines, pre-payment penalties, and processes. Then, you’re able to make an educated decision on the loan that’s best for you.
When you find the perfect house before you find the right loan, you could find yourself feeling desperate and tempted to accept almost any conditions for fear of losing the house. Furthermore, various programs exist for first-time homebuyers, members of the military, etc. If you’re rushed and feeling in a crunch, you may miss out on money-saving opportunities.
Sellers often find themselves receiving multiple offers from buyers. In these cases, it’s not always the highest bid that wins. In fact, it’s more likely that the seller will opt for the buyer who is already pre-qualified for their home mortgage loan. Pre-qualification for the funding of the purchase means that the length of time to process the transaction is reduced. When you’re not prepared financially, most sellers won’t be patient enough to wait for you to clean up your credit score and go through the lengthy home loan application process.
Pre-qualifying for a home mortgage loan can also help you refine your “must-have” wishlist for the house you’d like to buy. You may find that your budget does not afford the bells and whistles, or you may have to adjust your desired location to fit your realistic price-point.
The importance of mortgage loan pre-approval should supersede all other activities pertaining to buying a house. Before setting your heart on the house you can’t live without, seek out the mortgage loan terms you know you can live with, and put in your offers with confidence.
Your real estate agent is the best source of information about the local community and real estate topics. Give Jennifer Bierfeldt a call today at 540-422-3264 to learn more about local areas, discuss selling a house, or tour available homes for sale.