The very first thing that a buyer should do when considering a new home purchase is contact their Mortgage Broker or Banker and get pre-approved. However, many times this is not the case. Many times buyers see a home that they like either by driving buy it or searching on-line. This home sparks the interest and they use on-line calculators to see if the home is affordable. The payment appears affordable and within their budget. The question is with tightening credit and underwriting criteria will the documentation support that theory.......
Mistake #1 - Test Driving Homes before Pre-approval - Looking at homes on your own or with a Realtor prior to have a clear understanding of your qualification, the cost and the payment is a recipe for let down. Two things commonly happen to the consumer when this approach occurs. They fall in love with the home and either buy it even though it was above their comfort level or get disappointed when they find out they do not qualify. Both are dangerous as one could lead to financial disaster and the other could lead to inaction that will cost you later.
Solution - Consult your Mortgage Broker or Banker on your qualification levels when you get the desire to buy. The consultation is free and can save you time, money and heartache. If you do not have a Mortgage Broker or Banker get a referral from someone you trust and respect or do thorough research and interview two or three. Generally your Realtor will know someone that you can trust.
Mistake #2 - Getting Pre-approved without providing your documentation - If the Mortgage Broker or Banker is willing to issue you a pre-approval in today's credit market without reviewing all of your income and asset documentation and looking at the credit RUN! Every dollar counts and without reviewing the tax returns and the income documentation we may qualify you using an income that will not stand when the loan is underwritten. Your Mortgage Consultant should take the conservative approach to your income to leave room for the unknown.
Solution - Find a Mortgage Professional that you feel comfortable with and invest in yourself by meeting with them face to face to get your pre-approval. This will allow you and the Mortgage Professional to talk in detail about the situation and make sure that you explore all options. If you are unable to meet in person the next best thing is to provide all the documentation necessary and have a phone appointment on speaker phone. (You could always do Webcam or Webinar meetings as well).
Mistake #3 - Assuming the Pre-Approval is good indefinitely - Pre-approvals are credit approvals. Credit is a snapshot in time and can change daily if you are an active user of credit. If you were borderline on your credit approval from the beginning say 623 Fico and you are going FHA and you go buy some 0% interest at Home Depot you may be at risk. A credit report is generally good for about 60 days. Since a Pre-approval is a credit and income approval any change in either make make it invalid. Another thing buyers are not aware of is programs and guidelines are frequently changing and if they are not being updated by their Mortgage Professional they may again be at risk.
Solution - Stay in constant contact with your Mortgage Professional (They should be in contact with you but it is a two way street). Make sure that there have not been any program changes that would affect your approval status. You also have to keep your Mortgage Professional aware of anything that you have done that may help or hurt your approval. An example would be a pay raise or a new credit purchase. Communication is the key to protecting your Pre-Approval.
The next time you are considering buying a home and you are in California, Oregon or Idaho go to http://capitolmortgage.com/officers-detail.aspx?LONum=161 for your pre-approval.
Congratulations you are pre-approved!
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