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Why A PreApproval Is Important To Your Home Search
Dated: June 16 2017
One of the first and most important steps to buying a house is getting financing; for this step there are many types of mortgages available. Each type of mortgage varies from how much money is needed down to debt-to-income ratios, and there are even loan programs for those that do not have money. It is essential that every home buyer knows the best type of mortgage for him/her.
A simple solution for finding your type of loan is to get a pre-approved mortgage. Some buyers don’t think it is important to get a pre-approval, so they don’t even get one.
Getting a pre-qualification is not the same as getting a pre-approval, despite what many buyers think. A pre-approval is a written commitment from a lender to a potential buyer. This gives lenders the buyer’s bank statements, tax returns from over the years, employment verification, and credit reports. This process can be a little lengthier than a pre-qualification, but is completely worth it.
There are still many conditions to be met after a mortgage pre-approval is released for the lender to give the funds. The major condition is that the buyer finds a property with a satisfactory appraisal, meaning the property must be worth what was agreed and doesn’t require bank repairs. Other conditions in a pre-approval is acceptable homeowner insurance binders, good credit, and an acceptable home inspection.
A pre-qualification is only a prediction of how much buyers can borrow. In some cases it could prove to be useless, as many lenders prefer to ask questions about a buyer’s incomes, debts, and other assets to issue a pre-qualification. Some lenders even use credit reports, leaving buyers lost when formally applying for a mortgage.
A buyer should get a pre-approved mortgage before they even begin looking at houses. This provides an opportunity for buyers to learn what their credit score, a thing some first time buyers don’t know yet. It is a possibility a buyer could have poor credit, which is a common problem, being that most lenders have credit requirements before loaning.
Another problem that could arise is that buyer’s credit reports could have an error, which happens without close monitoring on their reports. This problems can take months to correct.
Getting a pre-approval can get rid of disappointment when buyers realize they cannot afford a home. Obtaining a pre-approval can show buyers what they can actually afford without getting their hopes up with a house that is too expensive for them. A pre-approval can also gives buyers a good understanding of how much they are actually going to pay, including real estate tax, homeowners insurance, and many miscellaneous costs.
Getting a pre-approval is especially essential for the self employed or those with independent contractors, because it teaches the rules of proper documentation. Self employed buyers are also required to provide 2 year tax returns. This pertains also to those that work off of commission, providing lenders documentation of a stable and obtainable income.
If a home has multiple offers, it gives the buyer an advantage having a pre-approval; they most likely win against those who only have a pre-qualification.
From contracts to closing, real estate transactions usually take about 60 days. Pre-approved buyers will be able to close much faster than one who is pre-qualified, this is due to most of the background checking being done by the lender.
Contact me for your pre-approval options and let me point you in the right direction.
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Ted M. Daigle eXp Realty
1720 Kaliste Saloom Rd Suite B-2
Lafayette, Louisiana 70508
Ted M. Daigle | Realtor
About Ted Daigle – Realtor Growing up in Church Point, LA instilled values of hard work and dedication, which has carried over into every aspect of his life, including real estate. This Lafayette r....