Start Me Up, I Want to Buy a Home
To borrow yet another song reference, and you know I'm fond of those, 'it's not unusual' for first-time buyers to come in our door and readily admit they have no idea where to start the home buying process. Often they are referred by real estate agents who tell them there's zero chance they'll see the inside of their cars on a property search until they have a pre-approval letter in hand. But what is a mortgage pre-approval, where does one start that process and how to get a letter?
The Big Three
Fundamentally, a mortgage preapproval is nothing more than a lender's analysis of your income, assets and credit. That's it. Yes, we are going to need to pull a credit report and no, you will never be a serious contender to purchase a home if your lender does not run an actual credit report. I've discussed why, in the vast majority of cases, there's nothing to fear with a credit pull here, but along with your income documentation (paystubs, W-2 forms and tax returns, etc.) and bank statements (two months, all pages) we are then able to determine the boundaries of your mortgage approval. This, in turn, will allow us to generate a pre-approval letter for you. You'll note that I didn't mention anything about having identified a specific property and that holds true at this stage. While we will take general property characteristics into consideration (price point, HOA dues if any, and so on) you do not need to have a property in mind in order to get a pre-approval.
The Big Two
Now that we've identified the components of the pre-approval, let's address the two main purposes it serves:
- It tells us, the lender, the limits of your borrowing capacity. By analyzing FICO score, debt ratio (DTI), asset reserves, down payment (LTV) and all other borrower traits, we can set limits on what's possible for your home search.
- It tells you, the buyer/borrower, how your credit capacity translates into a monthly housing payment and how that will impact your financial budget going forward. Perhaps one of the unexpected outcomes of the pre-approval process is how informative and educational it becomes. Prospective buyers walk in admitting they know next to nothing and walk out fluent in some of the finer points of mortgage lending. This transformation can happen over the span of just a few weeks.
The Big One
So what's the next step? With us, you make a digital mortgage application online. At least in 99% of the cases, that's the most efficient, intuitive and user-friendly way to get started. There is no cost or obligation to get pre-approved here at Guaranteed Rate. Your pre-approval is generally valid for 90 days and can be 'refreshed' if necessary. And no matter how many properties you tour and how many letter revisions you require, we are here to answer any questions and to assist you throughout the process. Get in touch any time if we can help.
Robert J. Spinosa
Vice President of Mortgage Lending
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.
Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 - (866) 934-7283