Pre-approval is essential for every home buyer before they start looking at homes.
This article:
Before you shop for a home, unless you’re paying cash, mortgage pre-approval is your #1 home buying preparation tool.
You can get pre-approval to know what price range you can affordRealtors and sellers won’t take you seriously without itYou will have a smoother and quicker mortgage process
These are some of the advantages should Your home will be convincing enough. Only 42 percent go home shopping without pre-approval for a mortgage.
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Steve and Sue's story
What if you disregard this advice and go for the virtual tours of a hot market? What if you find love on the first day? That could be a problem because unless you’re paying cash, no one will take your offer. You may not be permitted to visit the property.
Ask Steve and Sue, real estate buyers who learned the hard way.
Steve and Sue leapt the gun, and started their home search online.
After they had found the homes they liked, the couple reached out to a real estate agent to see the properties. The agent wanted to know if the couple had a mortgage preapproval letter. Steve and Sue assured the agent that their credit score and finances were perfect and that everything would be fine.
Then shop for houses.
Steve and Sue were mistaken. In fact, their offer never got off the ground because they couldn’t produce a pre-approval letter. In many of today’s hot sellers’ markets, a solid pre-approval letter is a must.
To add injury to insult, Steve and Sue discovered that their finances were not as “impeccable” as they’d believed.
Related: How to finalize your real estate offer.
Steve recently switched from being a salaried employee to becoming a self-employed entrepreneur. This alone can make it difficult for lenders to approve mortgages. They almost always need to see evidence of at least two consecutive years of successful self-employment in order to accept this income.
In addition, Steve, like many business owners, wrote off a sizable chunk of his gross (before tax) income — and that’s the income most mortgage programs use to determine what you can (or can’t) afford.
Steve and Sue were embarrassed and disheartened to find out that their purchasing power was only about 80 percent of what they’d expected. That’s why it’s smart to shop for money, then shop for houses.
Sellers are more selective than ever
It’s a hot market in just about every part of the country. This means that sellers can be pickier when choosing what offers they’re willing to accept.
Related: Home inspection ready to sell your home.
In a hot seller’s market, inventory tends to be scarce. You will have an edge over your competition by getting pre-approved. A mortgage pre-approval allows you to make an offer with confidence and shows that you’re a serious buyer with the means to purchase a seller’s home.
Many real estate agents won’t even allow homebuyers to tour their listing if the buyers don’t show up with a pre-approval letter from a reputable mortgage lender.
What is a preapproval letter?
A mortgage pre-approval letter from a lender assures you, sellers and real estate agents that you have the ability to a complete the purchase of any home that meets the lender’s guidelines.
The mortgage pre-approval will show you what you can spend and what your monthly repayments will look like.
Pre-approval for mortgage is more than pre-qualification. Many lenders issue “pre-qualification” letters after asking you about your income, debts and assets, and perhaps checking your credit.
Related: Can I afford this home
can i afford this home calculator | home affordability calculator
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Although a pre-qualification note is better than none, it's better than nothing. Some thought into your prospective purchase), it can’t compete with an offer from a pre-approved buyer. A mortgage application must be completed and all documents submitted to secure pre-approval. These documents can include, but are not limited to:
W-2s and pay stubs (typically for two years)If you are self-employed, or if you receive commissions or bonuses, tax returns typically take two years.Statements from bank, retirement, and investment accounts (two to twelve months depending on the loan)If self-employed, financial statementsLetters of explanation to resolve credit problemsIf you are paying or receiving spousal and child support, divorce decrees
Sometimes one document can trigger a request for another. An example of this is a bank statement showing 15 bounced check in one month. This could lead an underwriter questioning your financial management skills. It’s best to resolve these glitches before home shopping.
Pre-approval letters can be obtained and you can shop for rates later.
You don’t have to go with the lender from which you receive your pre-approval letter.
Pre-approval is required from any reputable lender before you can accept an offer on a home.
You can then shop for a mortgage with at least three lenders, but you could also be able to work with many other lenders. As long as the lender is able to close on time, you will get the best rate possible.
Many homebuyers give up on mortgage shopping after receiving one quote. A Stanford University study found that buyers pay an average of $2,500 more if they don't compare quotes from at most three to four mortgage lenders for a $200,000 loan.
So, don’t let mortgage rate shopping deter you from getting a pre-approval letter first. After all, the best rate in the world will do you no good if you can’t buy the house.
Original post here: Pre-approval is essential for every home buyer before they start looking at homes.Pre-approval is essential for every home buyer before they start looking at homes. syndicated from https://reversemortgagesolutions.net/
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