The answer is: It depends. It depends on many factors which is why buying real estate shouldn't be rushed. You need to analyze and understand your current situation. Where you are now. Then where you want to be might take 2 months, or 2 years depending on the plan that is developed to get you to home ownership.
Here's is just one example: Potential buyer sold condo 2 years ago, he and wife have good jobs earning $70,000.00 per year each, and sees an ad online and is convinced they can buy a home. Call is made to #, buyer gives some info over the phone and is issued a pre qualification letter for a VHDA Plus loan for $475,000.00. Buyer gets excited and calls agent friend and says " I just got approved for a mortgage for $475,000.00. Can you show me that little farmette on 6 acres that I've been wanting to buy? That is the perferct place for me to run my construction business from, and my wife can run her dog kennel from there." Agent: Oh wow, congratulations! Sure, I can show it to you. Agent looks it up in MLS and sees they just reduced price to $489,000.00. That's ok, we can offer $475,000.00 if you like it! ... Showing scheduled, buyers love property, agent prepares offer, the excitement of home ownership grows, and agent is calculating the commission!
It's a common scenario- but wait. Why is above scenario all a big waste of everyone's time? Should you have called agent first that is familar with lenders and loan programs?
Here is why you shouldn't rush when preparing to become a homeowner. First, yes, the VHDA Plus is a great loan product and is a best seller right now. So let's start with the ad that lured you in. "Affordable 30 year fixed rates - Low payments - Extended lock-ins - Loans serviced by VHDA - Free Involuntary Unemployment Insurance with some loans." "FHA Plus: No down payment cash is needed, because in addition to VHDA's FHA-insured 1rst mortgage, you'll also receive a 2nd mortgage to help fund your down payment and closing costs. - Fixed rate for 30 years on both the 1rst and 2nd mortgages - Maximum loan amount: 1rst mortgage is maximum FHA mortgage, 2nd mortgage- 3.5% - 5% of sales price. - No cash back."
You and your agent are doing some quick calculations like what is 5% of $475,000.00. You think this is all looking and sounding good!
But that pre-qualification had some contingencies attached that weren't discussed on that first phone interview. Here is a list of obstacles that just crushed your plan. They are " Eligibility Requirements" What are they? (1) No prior ownership in any residence during the previous 3 years. (2) Must meet income and sales price limits. (3) Property may not be used in trade or business. (4) Lot size is limited to 2 acres ( Waivers may be obtained up to 5 acres) (5) VHDA's free First-time Homebuyer class must be completed prior to loan approval. Both husband and wife must take class.
Problems? 5 of them:
(1) Buyers owned and sold condo 2 years ago (2) Maximum gross household income for 2 or fewer people is $120,900.00,buyers earn $140,000 (3) Buyer and wife both wanted to operate businesses from the property. (4) Lot size is 6 acres. (5) Maximum sale price is $450,000.00
So now what? You should have learned some things from that experience. You now have decisions to make. Do you see if current loan officer has other programs? Do you interview other loan officers? Do you interview other agents? Probably yes. Do you rush to make decisions from now on? No.
Pre-qualification doesn't automatically mean
Jeff Pearl / Lic in VA
Remax Distinctive - McLean VA
703-727-4876
Homes / Land / Farms / Historic
Equal Housing
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