Getting Pre-Approved Before Shopping for a Home

Buying a home is a complex process that causes hair to fall out and causes strain on family relationships. Many make the process even more stressful by having to do much of it twice. One of the worst mistakes homeowners make is forgetting to get financing lined up before starting to search. Many of these premature shoppers find their dream home, then try to get qualified for a loan, only to find they can’t get qualified and have to raise more cash than they have or clean up their credit before the bank will loan them enough to but a home. Attractive real estate listings move fast in many cases, so that a home may be gone before the potential buyer can get qualified.

The ideal first step for anybody considering buying a home is to get pre-approved for a mortgage. Pre-approval letters are given out by lenders to buyers without the consumer actually applying for a loan. Many sellers will not even entertain an offer from a buyer that hasn’t been pre-approved, and some agents will not even show homes to shoppers without a pre-approval letter. Before really diving in to search for your next home, you should first go see a licensed mortgage loan officer. A professional will take the time to inform you of various options and educate you on the process before delving in to your credit history and finances to determine what you’re qualified for. Then he’ll issue you a pre-approval which is essentially a commitment to extend the loan.

Pre-approvals, of course, do not necessarily guarantee you’ll get a loan. Drastic changes to credit score, employment or other financial areas can derail a loan, even when the borrower has been pre-approved. The letter will, however, open doors that may otherwise be closed, alleviating a small piece of the stress that comes with home shopping. But the borrower will still have to go through the loan application process once they’ve made their choice, opening the door for new credit problems to kill the loan. A pre-approved borrower is a prepared home shopper, and that preparation can really make the whole process go much more smoothly.

A good mortgage professional will do much more than just a background check and a pre-approval, spending time with a buyer to explain the cost of getting into a new home. In addition to a down payment and pre-sale costs, there are also a variety of closing costs that vary state to state. Title transfer fees, administrative costs, credit report fees and home appraisals are just a few of these costs. A loan officer should make sure you understand what these costs are and provide you with a good faith estimate of these charges, providing you with at least a ball park figure of how much cash you’ll need to get from offer to closing.

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