Buyers Week! How to Get Pre-Approved for a Loan
There are several reasons why you, as a Buyer, need to get Pre-Approved for a home loan. If you have found the best Broker they won't even show you homes unless you have been Pre-Approved by a lender. Your Broker will usually have someone they can refer you to. This Loan Officer is someone they have done several transactions with and know and trust that this person will get the job done in a professional and speedy way. But as the consumer you have every right to seek out and interview lenders yourself. And you should!
Reasons to get Pre-Approved:
1. To find out if you are eligible to purchase a home: When you go through the Pre-Approval process with a lender they will check your credit and assets. They need to make sure that you are able to get a loan. When they check your credit they are going to look at your credit score. Most loan programs require a minimum credit score. In addition, they are going to check to see if there are delinquencies or mistakes on your report. You will go over this information with your Loan Officer.
2. To find out how much you can spend: Most people have no idea how much they will qualify for when they go to purchase a home. Many factors come into play when determining this amount. The Loan Officer is going to look over your income, your debt, and your assets. They will come up with a formula to figure out how much you qualify for. BEWARE OF THIS NUMBER! If you have really good credit you may qualify for much more then you thought. But you need to make sure that at that price you can afford the monthly payments. There is a difference between what you will qualify for and what you can afford. Make sure to discuss this with your Loan Officer and your Broker. They can help you determine what would be a good starting point.
3. To begin the Loan Application process: Once you have found the Lender you would like to use they are going to go through all the process from above. Then they will have you fill out your Loan Application. This is to actually apply for the loan. They will usually have you fill most of this out before you have found a home. Once you have found a home that you would like to make an offer on, they will fill in the information about that specific home. If you get all this done in the beginning then you are several steps ahead and can close on your loan a lot quicker.
A few tips to think about. Make sure you speak with a couple different Lenders to make sure you are comfortable with that person. Your Broker will usually have several for you to choose from that they have worked with on a regular basis and knows how they do business. But like your Broker, you have to have a good re-poor with that Lender. Be careful of the BIG guys! The major banks. They are pretty competitive with their fee's, but have been known to drag their feet when it comes to getting the home closed on time.
Once you have done this you are ready to look at homes!
That is when the fun begins.
Next time I will talk about the home searching process and what to expect.
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