Mortgage rates are seeing historic lows and now is an excellent time to buy a house if you’re in the market to do so.
In today’s climate, we’re seeing a low inventory of homes for sale, and when there are more buyers than sellers in the marketplace, we tend to experience multiple offer situations and bidding wars, and the process may become a little more challenging for buyers.
If you’re starting your home buying journey, talking with a lender is a smart strategy. When you know your available options and confirm your budget, you’ll be able to shop for homes with confidence. With the onset of COVID-19 and the subsequent tightening of credit and changing of guidelines, this step is more important than ever. A seller will often want to see a lender letter even before allowing a home to be viewed.
Our trusted local lending partner, PrimeLending, offers the following advice for getting your home buying ducks in a row financially:
Pre-qualified vs. Pre-approved
How to Get Pre-qualified for a Home Loan
Getting pre-qualified for your home is a very good idea. It’s a simple, initial step you can take before starting the formal loan process. It’s not required, but it will save you a lot of time and hassle once you’re ready to buy and start looking for a home.
Pre-qualification gives you an estimate of how big of a loan, and what interest rate, you might qualify for, as well as your potential monthly payments. The information you get will be based on an informal conversation you have with a PrimeLending Loan Officer. You’ll fill out a loan application and be asked some questions like:
- What do you think your credit score is?
- What is your income?
- How much cash or other assets do you have?
- How much debt do you have?
Your PrimeLending loan officer will then review your information, and check your credit score. It’s really quite simple. Completing the application and answering the questions may take as little as 10-15 minutes. You’ll likely have an answer within a few hours or on the same day, depending on when you apply. There are no risks, costs, and it’s easy. You’ll then receive a letter stating the loan amount you’ve been pre-qualified for to have handy when you start looking for homes. There really aren’t any reasons you should not take the step to get pre-qualified:
- It will not affect your credit score
- No additional documents are required besides the application
- There are no fees or other costs for pre-qualification
Why Get Pre-qualified for a Mortgage?
To take full advantage of pre-qualification you should do it before you start looking for a home:
- Knowing the loan amount you could qualify for will tell you how much home you can afford
- You’ll save time by only reviewing homes in your price range
- If you discover any credit problems you can resolve them early
- You can confidently make an offer as soon as you find a home you like
- Your offer is more likely to be accepted than the offer from a buyer who is not pre-qualified
- You might get more support or help from a real estate agent who knows you’re serious about buying
How to Get Pre-Approved for a Home Loan
If you’re able or have the time to plan ahead, getting pre-approved is even better than getting pre-qualified. Offers backed by pre-approved financing are the most attractive offers you can make to a seller.
While getting pre-qualified provides you a loan amount, interest rate, and monthly payment that are estimated, pre-approval gives you the specific loan numbers you do qualify for. It also starts the formal application process. Other considerations associated with pre-approval include:
- It takes longer, but that’s because it’s more in-depth and of higher quality
- You’ll need to start collecting and submitting the required paperwork, including pay stubs, tax records, banking, financial or other investment, and asset statements
- Your credit will be checked, your asset to debt ratio will be closely examined and your income will be verified
- The good news, since it includes almost everything required as part of the mortgage loan process, once pre-approved, you’ll be ahead of the game
Why Get Pre-approved for a Mortgage?
Pre-approval takes you much further through the application process and puts you in an even better position to buy.
- You’ll be able to move much faster once you find the home you want
- Most of the paperwork will be out of the way so your loan can close faster
- You’ll be a more desired buyer with approved financing
- Sellers will prefer your offer because it will likely close without trouble or delay
- In a competitive market, it’s unlikely you’ll lose a home to a buyer without financing
What Happens After Pre-Approval?
Pre-approval gives PrimeLending an accurate understanding of your financial stability and ability to repay the loan. Once you find the house you want to buy, the final stage of the loan process begins. You’ll let us know what your offer is, and exactly how much money you want to borrow. The next steps to finalizing your loan include:
- The house will then need to be inspected to make sure it’s in good condition and to reveal any deficiencies that could require repairs or more money
- The house will also have to be appraised to make sure the purchase price accurately reflects the current market value of similar homes in the area
- All the paperwork and documents you will have submitted will be double-checked and verified for accuracy
Pre-approval gets most of the work you have to do in the mortgage process out of the way, which will give you greater peace of mind once you’re ready to make an offer on a house. Depending on the type of loan you’ll receive, and other factors, your pre-approval should be good for at least two to three months.
Your PrimeLending loan officer will work with you throughout your pre-qualifying or pre-approval process to make sure all your questions are answered, and to keep things simple. They’ll even help you collect and submit documents.
Ready to get started?
For answers to any questions, contact your PrimeLending Mortgage Expert, Brett Hartlaub at 503-522-7740 on the web at www.bretthartlaub.com or contact us via the form below and we’ll get you connected: