Why get a Loan Pre-Approval?
Here are a couple of reasons why you need and want to get a loan pre-approval before you buy a home. If we are successful in persuading you to get pre-approved, then please fill out the contact form below. Questions? You may also call us at 760-798-9024 so we can refer you to a lender who we know that may be able to help you.
A loan pre-approval gives you a blueprint of how much home to shop for.
This saves you a lot of time if you know exactly what budget you are working with. When you get a pre-approval, the lender takes a really good look at your credit, income, and down payment source. Expect to provide your tax returns, recent paystubs, and bank statements up front to the lender.
The lender will also give you calculations on what your monthly payments are going to look like given current interest rates and different purchase price/ downpayment scenarios.
The benefit of doing this allows you to differentiate the loan amount that the lender is willing to lend you vs. what you are willing to pay towards monthly housing payments. Most people buy homes very close to or at the maximum amount that they are pre-approved for. Those who strictly adhere to a fixed budget (i.e. some seniors) will want to buy below their pre-approval amount after factoring in monthly HOA costs, etc.
The lender is willing to lend you X dollars but are you willing to borrow X dollars?
Basically, you might learn from the pre-approval process that you are officially pre-approved to buy a home for up to $500,000, but you are only comfortable with the monthly payments of buying a home for up to $450,000.
So, why look at homes and neighborhoods that are are not consistent with your personal and financial goals?
Stay out of trouble – Get a mortgage that you truly can afford
Some buyers rely on their pre-approval amount and shop for home based on their pre-approval amount without stepping back to analyze how much mortgage payment they can afford given their own personal circumstances and values.
Ask yourself what is truly important to you? A big house with less money to buy experiences such as dining out or travel? Smaller house but more financial breathing room and work less overtime, or retire early?
When you skip the step of asking these “soul” searching questions, unfortunately you might run the risk of getting in trouble down the road. This means risking losing your home. Learn from the recent history in the real estate industry – and learn the lessons quickly!
Some loan programs you may hear about from lenders these days:
- Minimum 3% Down Payment
- Minimum 3.5% Down Payment Loans (FHA)
- 0% Down Payment Loans (with Down Payment Assistance)
- 0% Down Payment VA Loans
- Renovation Loans For Purchase and Refinance (If you have a house that needs repairs, upgrades, or improvements)
- Zero Monthly Payment Purchase Loans or Refinance Loans using a Reverse Mortgage (for those with equity on their home or significant down payment for ages 62 and older)
- And much more… please ask for more information and loan program choices from the lender that you trust
Another reason why you want to get a pre-approval before shopping for a home:
A pre-approved status helps you make a strong and competitive offer
After you see several homes with a home buyer specialist and pick one that you like – the next reasonable step is to make an offer. The offer will consist of what price and terms you are willing to buy the home for, including disclosing to the seller that you will be financing the purchase of the home.
Making an offer without a pre-approval status makes for an incomplete (or weaker) offer.
If your purchase of the home is contingent on you getting a loan, the seller will naturally want to know if you can get a loan to buy the house.
This is the “show me the money” part of a the offer process.
Show the seller the money
When you make a complete offer package on the home that you just fell in love with (and probably others fell in love with), not only do you write an earnest money deposit check, show the seller a proof of funds, but you also need to provide a pre-approval letter if you are not paying all cash.
Without a pre-approval letter, your offer may seem incomplete and weak from the seller’s eyes especially if you are competing with cash buyers and other pre-approved savvy buyers and their buyer’s agents.
When you make an offer, the goal is for you to win and get your offer accepted. To get closer to this goal, show that you are a qualified buyer who can close the deal. In working with the buyer’s agent, you will also learn other ways to make your offer stand out and get the home that you want.
Time is of the essence – set yourself up for success.
Many experienced home buyers know that time is of the essence when it comes to buying a home. A few business hours or days of delay could greatly impact your move. In a real estate transaction a single delay could cause a chain reaction. So getting all your paperwork in the hands of the lender before you shop for a home gives you a lot of lead time.
Think of getting a pre-approval as leaving early for a very important appointment that you cannot afford to miss. To arrive on time, you leave a few minutes early in case you encounter unforeseen events or slow traffic. If you allow yourself enough time – you lessen or eliminate stress.
Our experience in working with buyers and lenders taught us that pre-approval is a key initial step in buying a home.
We could go on and on but if we have convinced you of the benefits of a pre-approval, your next step would be to contact a lender to get it. Note that a pre-approval from a lender does not obligate you to get a loan from them. A pre-approval is also free and is not a loan application. You can still shop for the best loan later (just don’t overdo it so you do not have multiple credit inquiries).
How do you choose a lender?
This is a given – but you want to choose a lender that has honesty, integrity, and a good reputation. If you do not have a clue on who to contact, ask for a referral from experienced people that you trust. If you would like to get connected to a lender that we trust – please fill out the contact information below.
What to expect from a lender?
The lender should ask you so many questions upfront that it may make your head spin. You see, the lender asks so many questions and documents because they need to get a complete picture of your financial situation (even things that seem like it’s none of their business such as whether you had a bankruptcy, short sale or foreclosure, etc.). If they do not ask you upfront, then you will likely get a big surprise at the last minute – which could get you stuck.
If you are getting a loan these days, expect to reveal relevant information to the lender – and do it in a timely manner. In return, the lender of your choice will work hard to get you your loan and work with your buyer’s agent to ultimately get you the home that you want.
Are you ready to get a pre-approval? We are a team of real estate professionals who have organized our business to help you get the home that you want. Getting you the house of your dreams is a team effort – and you are the most important part of the team. We are eager to help you. Be sure to contact us!
Getting a loan pre-approval seems like an extra step that takes extra effort. But it is worth it to have the confidence to shop for a home backed by a team of professionals. Make sure to circle back to your buyer’s agent and keep the agent updated on where you are at with the pre-approval process. You should also start getting listings alerts from the agent so you can get your eyeballs on interesting properties that you want to visit in person with your buyer’s agent.
We are here to help. We also work on your time frame. So be sure to contact us so we can get to know each other and how we can begin to help you. Thanks for visiting DreamWellHomes.com