Home Buying Process: Get Pre-Approved

April 15, 2019

In home loan vocabulary, a Pre-Approved is different than Pre-Qualified!  If you are ready to buy, get a pre-approval. Most agents will not show you houses unless you have a pre-approved letter issued from a lending institution or a proof of funds letter from a bank.

One of the easy ways to get these done is to go to your real estate agent and ask to help you get it. Here is the key- experienced and educated real estate agents deal with many lenders on a daily basis. Real estate agents know what they are doing, have the skills of different things related to home buying process. Approaching them for help will benefit you to have a least amount of aggravation.

Pre-qualification is something a lender or bank will give you without looking at a lot of your information about you. Based on the information you give them, they give you a general feel for what you might qualify for. This data is just a general quick-and-dirty number for you to know. They cannot give you a pre-approval without you submitting supplemental documents such as bank statements, tax returns, W-2s, pay subs, etc. etc., Usually people get a pre-qualification letter if they are not ready to buy yet, but just to have a general idea. This will be helpful even if you are a year out in actual buying,

When you are pre-approved on the other hand, it tells you exactly how much money the bank will loan you, and you are ready to go for home hunting and buying. The loan officer will run through your numbers like your qualifying income, runs your credit report, runs through the underwriting systems. Among other things, you can do several things to keep your chance to have better credit, which are pay your bills on time, set up auto pay to make it easier for timely bill payment, keep your credit card balance low preferably under 30% of your available credit limit, use your available credit to show a track record, and avoid negative marks on your credit history.

There are a lot of things you need to worry about when you are buying a home or real estate. One of them is to obtain a mortgage loan for paying for the home you are buying. Getting pre-approved is the starting point. Even if you have a checking account with a bank and have been dealing with them for a while do not mean that you are going to get a mortgage loan, no matter even if your credit is good.

When you go to a lender for a house buying loan, the first thing they look for is your debt-to-income ratio, how much money you have coming in as regular income and how much you have that is going out. A lending agency or bank is looking to see what level of risk that they are getting into if they loan you money for buying your house. When they receive your loan application, they are weighing-in and looking at the risk involved. The least risk you are better the chance to get your loan approved and better your interest rate can be, and easier the pre-approval process will be.  Banks are looking for your financial stability in your life.

If you are going to live in the house you plan to buy, means if this house is your primary residence, it is less risky compared to an investment property. Investment property is riskier for the lender. You need to have least amount of risk for the bank, for a possibility of getting the loan and getting a better interest rate that they can offer you. Your credit score is another important factor that a bank will look at before they pre-approve you. If your score is 700 plus, then you are doing good; if you are in the 500s you are not that good. Your credit score is a number that represents the risk a lender takes when you borrow money.  But there are loan programs out there that will get you pre-approved for your home buying, even if your score is lower than minimum.

Consult with a real estate agent who will direct you to an appropriate mortgage officer who is the expert in advising in mortgage loan matters. Get in touch with them is the first thing that you do even before you start hunting for your new home, A mortgage officer will review and verify items such as whether  you have a steady monthly income, have money in the bank and what your credit score is. These are certain preliminary things they look for and do when they process your request for pre-approval and your loan application.

When you seek for pre-approval, you need to fill out a form, along with it you submit documents including your tax returns. Before issuing pre-approval, the banks basically are looking for if you have certain level of credit available and you are a responsible debtor.

What do you do with your pre-approved letter that you received from the bank? You submit that to your real estate agent. He/she will use that when you submit your offer to buy a home that you liked. If you are sure about buying a home and want to make an offer on a house, your agent will submit your pre-approved letter along with your offer.

Once again, if you are ready to buy get a pre-approval.

Disclaimer: Please verify all information with appropriate professionals prior to making any decisions to buy or sell real estate in Delaware, or any other state. The author of this blog, SEESAN Ed, BHHS Fox & Roach Realtors, disclaims liability for any damages or losses, direct or indirect, that may result from use of or reliance on information contained in the blog.