HomeBuyer University: Buying a Home, Just Got Easier

When looking to purchase you new home, it is natural to be very excited and want to start seeing homes as soon as possible. In that excitement, you don’t want to miss the vital step of requesting a home loan pre-approval from your licensed loan officer. A pre-approval is a introductory look at your finances and credit worthiness to gauge whether you may be approved for a home loan, and for how much. It is not a guarantee for a mortgage, but the best estimation in lieu of a full mortgage application. Having a pre-approval ready is essential for several reasons. This class details reasons why buyers should obtain pre-approvals before seeing properties.

Understand your price range

Loan requirements and interest rates can vary. A pre-approval will give you a clear understanding of the programs and alternatives that you can use, what your expenses will be, and more importantly, what you can purchase. Without this, you may waste valuable time looking at properties that do not fit your financing or that are basically beyond your affordability. Knowing your price range also minimizes the emotional distress of seeing and falling in love with a home that you cannot purchase. This is one of the most important reasons why buyers should obtain pre-approvals before seeing properties.

Strengthening your position

A pre-approval gives you the option to act on a hot property. When you submit an offer, you usually must include a pre-approval letter. This ensures the seller that you are ready, willing, and able to buy. It is unlikely that a seller would consider an offer and take the chance on a buyer without any indication that a buyer can even pay for the property. In multiple offer situations, a pre-approval is even more vital.

Timing issues

A pre-approval saves time when making an offer on a home. Since most sellers will not look at an offer without a pre-approval, not having one prepared may lead to delays in submitting your offer and may result in a missed opportunity. In addition to this, pre-approvals involve reviewing documentation of income, and assets. Starting and addressing this step early on will also save significant time when processing your loan and achieving a quick closing.

Tip – How to get an accurate pre-approval

Incorrect pre-approvals can waste your time and money, and lead to frustration and disappointment. You should choose a loan officer and lender that are able to accurately assess your situation, so there are no surprises down the road. How do you know your pre-approval will be accurate?

Good indicators that the loan officer can provide an accurate pre-approval for you are:

• Your loan officer reviews key documentation – Merely looking at a credit report and asking you about your income, tax returns, and assets is not enough. When your loan officer reviews your actual physical documents, he or she is verifying other key components that are critical to providing an accurate pre-approval.
• The loan officer is licensed – Licensed Loan Officers go through rigorous education and testing. They must pass national and state exams, which are extremely challenging to ensure only the most qualified professionals obtain a license. (Currently, over 50% of individuals taking these exams fail). In contrast, other loan officers are only registered with the National Mortgage Licensing System (NMLS). They never go through the classes or pass the tests. They only pay a fee and register with the NMLS.
• Your loan officer and lender have years of experience in the industry – The mortgage industry is complex and ever-changing. Experienced loan officers and lenders keep up with the changing loan program guidelines to ensure pre-approvals they issue are accurate.