Purchasing A Home, Step by Step and the Definitions you will encounter. Part 3
PRE-APPROVAL LETTERS AND THE HOME SEARCH
O.K. my credit is great and you're my agent, so let's go buy a house. Back up the train there is a few more things you need to do first.
You will need a preapproval letter from the bank. A what ? A preapproval letter. The preapproval letter is a , well we'll call it an engagement between you and the bank.
You will fill out the application, the bank will run your credit (which we know is fine because you already checked right, right ?.....,,, good) and between your credit and earnings and debit to income ratio they will determine how much you can safely afford to pay and how much of a home you should be searching for.
Who the hell is the bank to tell me what I can afford?
Well there the ones with the money. There are formulas they use to determine how much you make vs. what you owe to determine what you can afford.
Remember the bank is protecting thier investment as well as trying to protect yours.
You will then get a pre-approval letter telling you how much of a home you can afford. This is the tool that WE use to start the home search process.
The letter is usually good for 90 days and tells you, that if everything stays the same ( remember they will rerun your credit again prior to closing) that they will loan you the money you need.
Some letters come with certain conditions you must meet to actually get the money.
An insurance binder (letter stating you will have insurance on the property), recent pay stubs etc.
Most sellers will require this letter prior to making a desision on whether or not to even entertain your offer.
Once we have the letter we can start the search.
In part 4 we will discuss the home search process.
Are part and yours
Remember you can call us with any questions....................... whether you use us ot not.
If you did not already check your credit please see our post about you and your credit