Before the Home Search Get the Pre-Approval
The figures don’t lie- over 85% of homebuyers begin their home search on the internet. But this shouldn’t be the first step in the process.
Before you get your sights set on Tri Cities homes, and get emotionally involved in the search process, you have to know just how much home you can afford. And the only real way to do this is with a pre-approval from a Tri Cities lender. And let me throw this in as well; don’t just choose any lender. 1-800-we-get-you-a-loan-we-promise is not the way to go. You want to actually close on that home at the end of the day. Just because they guarantee the lowest rate and no fee doesn’t mean they’ll actually live up to that when it’s time to sign at closing. Go to your bank or credit union first. Or at least talk to friends for a recommendation. If you know a Realtor, call them. If you don’t know a realtor, call me at the Tri City Home Team and I’ll recommend some lenders to go to. Please… You can thank me later.
A pre-approval letter from your lender helps you to focus in on exactly how much house you should be looking at. The definition of “crestfallen” is the look on the faces of a couple who’ve gotten excited over a home, maybe even gotten a Realtor to make an offer, only to find they don’t qualify for the loan amount on the home.
A solid pre-approval helps you get the best deal on a home. You are negotiating from a position of strength, as the seller and their agent know you are committed, qualified and prepared to actually close on the sale.
A pre-approval is NOT the same as a pre-qualification. A pre-qual is an estimate based upon the borrower’s verbal information ONLY.
I make about $50,000 a year. I have about $50,000 in the bank. I have about a 700 credit score
About is about how much a pre-qual is worth when shopping for a home.
A pre-approval is a lender’s results of doing their due-diligence for you. The lender will meet with you, and you will need to bring the following items with you:
- A copy of your most recent paystubs for at least a 30-day period. If you have overtime or other items that change each pay-period, prepare a note explaining how often these amounts are received.
- A copy of your most recent bank statements (checking, savings, and other LIQUID accounts) for a period of 3 months. Make sure you bring all the pages, front and back, of the entire statements.
- Documentation and current balances of any retirement accounts (401k, IRA, etc.), mutual funds, etc.
- The most recent 2 years W-2’s. It’s not necessary to bring the entire tax returns at this stage.
- Driver’s license(s)
- If you have a very good idea of your credit card and installment debt balances and current monthly payments, having a list of these with you will help.
With these items in hand, the lender will pull a credit report for you. It is very important that you go over the items shown to ensure that the creditors, account balances and monthly payments are accurate. Now is the time to clear up any discrepancies. Trust me- it’s rare when there aren’t mistakes on your credit file. Your lender can assist in getting these errors corrected more quickly and accurately than you can do yourself. Once this is done, the lender will have an accurate credit score and can then calculate the debt ratio.
Using the information you’ve provided, plus the credit report, the lender can then discuss with you the amount of funds you have available for a downpayment on a home, and calculate the amount available to you the purchase of a home. It is critical that you determine the amount you are comfortable paying on your mortgage loan each month, not just the maximum loan you qualify for.
The end of this process will result in the lender providing you a letter of pre-approval that you take with you. Provide a copy of this to the Realtor you choose to work with in finding your new home so they are showing you only the homes you can actually qualify for, and has in hand to present along with the purchase and sale agreement when you find the home you are ready to buy.
