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Why You Need Pre-Approval Before Home Shopping

July 29th, 2013 · No Comments

 Mortgage Application Approved Stamp Shows Home Loan Agreed

I get a number of calls each week from potential buyers wanting to see homes. One of the first things I ask is, “Have you talked to a lender?” Many times the buyer tells me they are waiting to find the house they like before they meet with the lenders. They may feel confident that the price range they want to see is what they can comfortably afford. With so many online mortgage calculators that is understandable that they feel that way. But, what if you don’t check your credit score every few months and what if you have had a recent job change or divorce? Just one situation can drastically change your ability to buy. On the other hand, with rates at historic lows you may qualify for more than you think!

So what does a lender do to get you pre-approved? Well, first the lender will ask you to bring them any documents that they ask for, such as a pay stub. Then, she will verify your income and assets and check your credit score. Once that is complete she will talk with you about how much you can afford for a mortgage payment and give you a pre-approval letter to share with your Realtor.  I always tell my buyers that I don’t care how much they can afford, I care about how much they are comfortable paying each month. There is a significant difference!

Once you find a house and have an accepted offer, the Realtor will give the lender a copy of the purchase agreement and you can start discussing interest rates. At that time the lender will order title work and an appraisal. They will also clear any conditions- for example they would verify the source of a large deposit in your checking. Was it a gift from a parent that wasn’t disclosed or a loan paid back?

You will lock in on your interest rate to make sure it doesn’t go up. Within 72 hours of doing that your lender will give you a Good Faith Estimate. That will tell you how much you need to close and what your monthly payments will be. Right before closing the lender will go through the final closing numbers with you. If the closing date has changed your taxes will change as well as they are prorated to the date of closing.

On the date of closing you will come to the Title office to sign the paperwork. Your lender and your Realtor will accompany you. The lender will have already told you that you need to bring a cashiers check for the amount they specify. From there you sign the paperwork and the Realtor hands you your keys! Always feel free to contact your lender or your Realtor any time after closing with questions. A good Realtor and Lender will always be willing to help.

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