When you go shopping at the mall, the salesperson does not care how much money you have in your bank account. They only really care if your credit card goes through when it is swiped. Well, no one I know personally carries around a credit card with a $200-500,000 limit. So, this is why the process of buying a home becomes a little more tricky.
Some consumers shop for houses the way they shop for a new pair of shoes. We, in real estate, call them "tire kickers." There are agents who will not show property to buyers unless they are pre-qualified by their lender.
Here is what John Faiella, Loan Officer at Gateway Mortgage Group, has to say about pre-qualification:
“Power” is not a word you typically associate with obtaining
financing for a home purchase, but it should be. Your power source:
pre-qualification.
What in the world is “Pre-qualification”?
The pre-qualification process allows you - and the
prospective seller - to know you are qualified to finance a certain amount of
money, even though you haven’t yet found the actual home you’d like to
purchase.
Why is Pre-qualification so Powerful?
In a nutshell, pre-qualification lets home sellers know that
you are a serious prospect - as opposed to tire kickers. Your pre-qualification
letter can be used as a bargaining chip.
For example, let’s assume you find your dream home next
week. The seller has two buyers in front of them making an offer on the house.
One (you) is pre-qualified with a mortgage and ready to commit. The other
potential buyer is just starting the process. Which buyer is the seller more
likely to give priority?
Bonus: Another nice benefit of being pre-qualified is that
we’ll be much less likely to hit unforeseen snags later on down the road.
How do I get Pre-qualified?
The pre-qualification process is quite simple. You and I
will briefly analyze your financial situation and determine how much home you
can comfortably finance. I’ll also ask you to fill out a mortgage application.
Meanwhile, it would be a great idea for you to begin compiling supporting
documentation such as:
• Recent
paycheck stubs
• Last
two years tax returns
• Bank
and brokerage statements
With a pre-qualification letter in hand, you’ll be ready to
embark on the journey of finding and negotiating the purchase of the home. Best
of all, you have the power in your hands.
Now, for all of you out there who are self-employed, there are other things to consider when it comes to pre-qualification. I learned this myself when my husband and I bought our first house last year. Ryan Heinemann, Branch Manager at First Home Mortgage, had these tips for the self-employed:
"A self-employed borrower must have 24 months in the business and the income is calculated based on an average income reported on tax returns based on an income calculation provided by Fannie Mae/Freddie Mac."
If you are serious about purchasing a new home, it is essential that you get pre-qualified, if not pre-approved. The most practical reason is that you want to know your limit as it will affect your process of viewing and deciding on your dream house. It would be terrible to look at a house and fall in LOVE, then come to find out that is outside of your financial capabilities. Set your boundaries up front and you will not be setting yourself up for disappointment.
So what is the difference between pre-qualification and pre-approval?
Pre-qualification is pretty simple. Your loan officer will ask you basic information about your income, debts, and assets. The officer will then give you a verbal estimate of how much you MIGHT be approved for in a mortgage. This is helpful mostly for deciphering your general price range in house hunting. This definitely narrows the scope for your real estate agent when she is selecting houses to show you.
Pre-approval is a more in-depth process. You must provide proof of your income, debts, length of employment, credit score, etc to the mortgage company or bank. This is where you will need the specifics detailed by John Faiella above, such as tax returns for the last couple of years, investments, etc. Once all of the documents are in order, the lender will give you a letter stating the maximum amount they WILL lend you.
Of course, a seller will be much more comfortable with a letter of pre-approval, as it indicates that there is LESS chance of complications in financing and that it is a good idea to enter into a contract with you. In a hot market, where a seller is looking at multiple offers, your letter of pre-approval will give you an advantage over someone who is not pre-qualified by their lender.
Once you know what amount you can afford, you will have to decide what TYPE of loan you would like. There are an assortment of options, depending on how much of a down payment you have on hand, how many years you would like to finance, and even location of the property can make it eligible for certain types of loans. Leigh Reid, Principal at First Trust Mortgage, had this to say about current lending options:
"Everyone knows how volitle and unfriendly the banking/lending environment has been over the last few years but we finally have GOOD news!!!
Banks are looseing up and it is getting easier to qualify for mortgages. Jumbo money ( loans over $417,000) is available up to $3,000,000.00 with rates as low at 3.00% . Lot loans, construction money and second mortgage are now available again with many lenders at excellent rates. Rates are at a all time low with a 30 year fixed rate at 3.875%.
If credit is a issue and you do not have a large down payment than FHA is available with a down payment as low as 3.5% Other government programs are now available to help people with no down payment. USDA and VA loans are excellent mortgage products for that first time home buyer. "
Buying a home is a BIG DEAL. Unlike buying a pair of shoes, a contract to purchase real estate is a legally binding contract that can be enforceable even in the event of death. So, do your research, and when you are SERIOUS about buying a home, start with pre-qualification. Your REALTOR will take you seriously and so will the seller of your dream home!
If you need help with financing your home in the Pawleys Island area, contact one of these fantastic professionals:
John Faiella, Gateway Mortgage Group
843-864-4253
Ryan Heinemann, First Home Mortgage
843-602-6861
Leigh Reid, First Trust Mortgage
843- 241-5628
Happy House Hunting!
No comments:
Post a Comment