Why Get Pre-Approved Before You Buy A Home?
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If you are serious about buying a home, it is very important to get approved for a home loan -- even before you make a purchase offer!
This article will save you countless hours of wasted time, and the stress of wondering whether or not you qualify for a loan.
Imagine for a moment that you are paying cash for your new home . just reach into your pocket and pull out thousands of dollars. Surely the seller would give you an incredible deal after seeing all that money.
Our pre-approved loans are not quite the same as cash . but they come pretty close. In fact, research shows that a pre-approved borrower has 97% of the buying power of a cash buyer. Walking around with tens of thousands of dollars in your pocket is not safe or practical, but a pre-approved loan from Best Mortgage is safe, and a really smart idea!
It has been said that the home buying process can be one of the most stressful events in a person's life. Now, with our Pre-Approval Certificate, you can lay to rest any concerns you may have about qualifying for a home loan.
The Home Buying Process
To help you understand this powerful home buying tool, we'll start by giving you an example of the steps involved in buying a home and applying for a mortgage using the TRADITIONAL APPROACH. To locate the home of your dreams and ultimately purchase it, here is the process you would likely go through:
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You spend weeks looking through dozens of newspapers and magazines and
driving all over the countryside until you find a neighborhood that appeals
to you.
Then, you spend day after day driving around the neighborhood of your choice, getting a feel for the values in the area and the kind of homes you really like.
You start going to Sunday open houses to get a look inside the homes you're interested in.
You meet a Realtor and start working together to find the best deal in that neighborhood on your favorite type of home in the price range you "think you can afford."
Finally, after countless days and endless hours of searching ... going to open houses ... calling on ads ... driving around neighborhoods ... researching the pros and cons of the area, its amenities, school districts and shopping facilities ... you find and fall in love with the perfect home for you ... and you want to BUY it!
Once you find that perfect home, your next step is to draft an offer to purchase it. This is where the expertise of your Realtor comes in. A professional Realtor will know exactly how to draft the offer and what clauses to include in the contract to protect your interests and your earnest money deposit. Once your offer has been submitted to the seller, you simply wait for an answer.
Now comes the most exciting . and most stressful . part of the entire home buying process. Only two hurdles stand between you and your dream home:
- The seller must accept your offer.
- You must qualify for the loan.
By this time your Realtor has probably instructed you to contact a lender
to begin the loan application process. You meet with a Loan Officer,
complete a loan application and supply supporting documentation. What is
involved in the loan application process? In the next section, we'll tell
you exactly what happens when you apply for a loan, and what lenders look
for in a borrower.
The "Traditional" Loan Application Process
Remember, at this point we are still talking about the old-fashioned "traditional" method of buying a home and getting a mortgage . where you make an offer first and apply for the loan second. You may have had a brief "pre-qualification" by your Realtor, or you may just be guessing that you can afford the home. The whole deal now hinges on you getting approved for the loan!
No loan ... no dream home. Gone! Just like that.
Let's look at the steps you will go through in getting approved for a loan:
- Step 1 - You meet with a Loan Officer and complete a Uniform
Residential Loan Application. The Loan Officer will pull a credit report
to check your debt repayment history. Most lenders require an application
deposit at this time to cover the cost of the credit report and an appraisal
report on the home you are buying.
- Step 2 - The Loan Officer will then request a series of documents to verify your income, checking and savings accounts, and investment accounts (e.g., W-2 forms, paycheck stubs, bank statements, etc.).
- Step 3 - Within three days of completing your application, the
Loan Officer will provide you with a Good Faith Estimate (GFE) of your
expected closing costs and a booklet explaining these costs.
(At Best Mortgage, the GFE is usually provided on the day of application)
- Step 4 - The Loan Officer will then begin processing your loan file. At this time an appraisal and title report on the home will be
ordered; and verification forms will be mailed to your employers and banks to
confirm the income and deposit information written on your loan application.
- Step 5 - Once the Loan Officer has received your credit report and all your income and financial asset documents, your loan package will then be submitted to a lender for underwriting. The underwriter evaluates your loan file to determine whether it meets the guidelines specified by the investor. The file is then either "approved," "denied" or "suspended" pending receipt of further documentation.
What Lenders Look For in Borrowers
Mortgage underwriters look at "the four C's": credit, capacity, collateral and character. These are the criteria that lenders analyze when deciding whether to loan you money. Let's examine each of the four C's in detail:
- Credit -
A lender determines whether you are a good credit risk by looking at your
past credit history. That's why we order a credit report at the beginning
of the loan process. Your credit report is a "snap-shot" of your past and
present debt, current available credit limits and a rating of your debt
repayment history.
- Capacity -
This means your financial capacity to repay the loan. In other words, do you
have enough income to make the mortgage payment each month and still have
enough cash left over to live on. The underwriter adds the proposed monthly
housing payment (mortgage + property tax & insurance) to your other monthly
debts (credit cards, auto loans, student loans, etc.) and divides your total
monthly debts by your gross monthly income.
For example, if the proposed mortgage payment would be $1,000 per month and you have $500 per month in other debts, your total monthly debt load would be $1,500 per month. If your total gross income was $4,500 per month, your "Debt-to-Income" (DTI) ratio would be 33% ($1,500/$4,500 = .33). The standard "Fannie Mae" guideline is that your total DTI should not exceed 36%, but most of the lenders we work at Best Mortgage allow us to exceed that figure if you have excellent credit and/or other "compensating factors" such as a large down payment or signficant financial asssets. We have managed to get some borrowers approved for loans with Debt-To-Income ratios as high as 65%!
- Collateral -
This is the value of the property you are buying. Lenders require an appraisal
report to verify the value of the property you are "pledging" as collateral
for the loan. This is important because if you fail to make your mortgage
payments, the lender will seize your property and sell it at a foreclosure
auction to satisfy the debt. If the home is actually worth less than you paid
for it, the lender will incur larger losses.
- Character - "Character" is a catch-all phrase that describes an underwriter's subjective determination of your over-all financial situation. Generally, they look at your job stability, your probability of continued employment, and your proven ability to save money and handle credit wisely.
How to get Pre-Approved
Let's review the entire home buying and loan application process as we've described it up to this point:
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You've spent untold amounts of time, money and energy to locate the
perfect home in the perfect neighborhood for you and your family to live in.
You sat down with a Realtor and wrote up a purchase offer.
You submitted your written offer to the seller and waited nervously for their response.
Finally, the news came back: The sellers accepted your offer!!
You met with a Loan Officer, filled out a multitude of forms and applications; and brought in an armload of documents to support the income and asset amounts claimed on your loan application.
Now, you're biting your nails, waiting for the critical "Yes" or "No" answer from the mortgage company.
After all you've been through, there is still a chance that you won't get the home of your dreams because your loan application could be turned down.
Now, let's see if we can make this process a little more fun ... and a LOT less stressful!
Wind back the clock and imagine that when you drafted your home purchase offer you were already approved for the loan. You had a Pre-Approval Certificate that your Realtor could include with your offer to the sellers. Wouldn't you feel more relaxed and confident? Wouldn't the sellers be more likely to bargain, knowing that you already had a written loan commitment?
The Pre-Approval Certificate gives the seller a GUARANTEE that you already have a loan to buy their home, and therefore, compels them to respond to your offer immediately.
By obtaining a Pre-Approval Certificate you eliminate the two major obstacles to buying your dream home:
- Obstacle #1: Will your purchase offer be accepted by the Seller?
- Obstacle #2: Will your loan application be approved by a Lender?
Wouldn't it be wonderful to walk away from the bargaining table knowing there's an excellent chance that you'll be moving into your dream home in 30 days, or less?
IMPOSSIBLE, you say? How can someone actually be approved for a home loan before they even make an offer to buy? And how can such a Pre-Approval Certificate compel the seller to give your offer so much credibility?
Let's explain the details of the powerful Pre-Approval Certificate.
It is possible to obtain the Pre-Approval Certificate we're talking about - and it's an ABSOLUTE MUST if you are even remotely interested in buying a home.
Here's What It Does For You:
- It gives you a WRITTEN APPROVAL from a lender for a SPECIFIC LOAN AMOUNT so
you know exactly what homes to look for, and in what price range you can
purchase.
- It gives you PEACE-OF-MIND, knowing that being approved
WILL NOT be an obstacle to buying your dream home.
- It gives your offer MAXIMUM CREDIBILITY, and shows the sellers that you're serious about buying their home because you've taken the time to get Pre-Approved. If the sellers receive multiple offers on their home, which one do you think they will pay more attention to? Yours, of course!
How to Get Your Own Pre-Approval Certificate
So what does it take to get this amazing Pre-Approval Certificate?
It takes three simple steps:
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You need to find a mortgage company who offers this unique Pre-Approval process. You've just found one! At Best Mortgage, we specialize in getting
home buyers pre-approved for a loan as quickly as possible.
You meet with a Loan Officer and fill out the loan application form and required paperwork. At Best Mortgage, we make this process as easy and painless as possible. If you don't want to come into our office, you can apply for a loan online using this website. Click here to apply online NOW! Or, if you are not comfortable applying online, call us at (425) 746-1310
Then, sit back and wait for your loan to be approved. At many mortgage companies, this process can take a a few days. But at Best Mortgage, we use comptuer automated underwriting to get your loan approved in a matter of minutes! You will then your receive Pre-Approval Certificate Look at all the steps you've eliminated by not using the traditional approach to buying a home:
- No need to have specific information about the property.
- No need to wonder if you can qualify for a loan after you make a purchase offer.
- No need to worry the sellers about whether you can really afford the home you are trying to buy. They will KNOW you are already approved!
Call us today at (425) 746-1310
for a FREE mortgage consultation. We can get you pre-appoved for a loan and ready to buy your dream home in no time.|
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