Why is it important to get approved for a loan?

Why is it important to get approved for a loan?

When you begin to look for a house it is really helpful if you know how much you can spend.  It'll save you a lot of time, and prevent you from focusing on homes you can ill afford.  Assignment #1:  find yourself a mortgage broker or banker and determine what you can afford.  From personal experience, I find they tend to err on the high side. So, your next bit of homework is to see what works for your budget and zero in on your preferred range. 

As people crunch their numbers, I like to refer them to a great web site www.ParagonTitle.com .  This wonderful, Bethesda settlement company has a bunch of on-line calculators to help you figure out monthly costs, closing costs, etc...  You'll need to have information about your house of interest, including yearly taxes, your mortgage interest rate and terms, etc... If you're not sure about how to get this information, give me a call. 

Ideally, what you seek from your future lender is a letter that states you have been approved for financing.  Not pre-approved.  Approved.  For roughly one year after the recent stock market crash one could make an offer with a financing contingency.  No longer (technically, I suppose you can do it, but you'll likely fail in your attempt if the house is popular).  At the time of this writing inventory is pretty low.  A well priced house will be competitive.  If you hope to succeed in your purchase you'll want to eliminate as many contingencies as possible.  Financing is an easy one.  You have to pull together all the paperwork eventually, so do yourself a favor and do it up front. 

One last point.  There are a lot of internet or e-loans out there.  I'm not a fan.  When clients have used them in the past I've seen gross errors and mismanagement of the loans, not to mention wacky out of town appraisers.  And, because we have no relationship with these on-line mortgage folks, there is absolutely no recourse should they screw up.  I have a healthy roster of local lenders who for the most part are just as competitive as the internet guys.  More importantly, if they say they can get you a loan, they'll get you a loan.  No nasty surprises at settlement.  If there's a screw up, I know exactly who to call.  And they're going to do everything in their power to correct that mistake, because I refer a lot of business their way. 

 And that is why it's important to get approved for a loan!