The Top 7 Reasons to Get Pre-Approved for a Home Loan

The Top 7 Reasons to Get Pre-Approved for a Home Loan

By: Patricia Barmatz

There are many steps that are required when purchasing a new home. The most important step is to be pre-approved for a home loan prior to looking for a house.

Now, keep in mind that a pre-approval is very different than a pre-qualification. A pre-qualification is given when the lender talks with you (usually over the telephone) and takes the information that you tell them and qualifies you off of your word without collecting any documentation from you.

The pre-approval process is a little more complete. In this process, the lender will ask you to complete a loan application and return it to them with all the documentation needed to submit to the lender for an approval. These items would include tax returns or W-2’s, paystubs, bank statements, etc. Once the lender received this information, they would run a credit report and submit the loan for approval. When the lender receives the approval, they will write you a pre-approval letter stating the purchase price and interest rate that you qualify for on a new home loan. This letter is then given to the seller at the time an offer is presented to show them that you have your financing in place.

Here are the top 7 reasons why you should get pre-approved for a home loan:

1. A pre-approval will tell you how much you qualify for on a new home loan. This helps you and your realtor to look for a property that is not above the amount that you can afford.

2. A pre-approval gives you the chance to go over the different loan programs available to you with your lender. You will also be able to see what the monthly payment will be on each program.

3. In today’s market it takes time to get a loan approved. Getting a pre-approval puts you ahead of the game by sending all of your paperwork in before you get into escrow. By having a pre-approval, you may be able to shorten the escrow period needed to close a loan. This can make a big difference to a seller that is looking to close as soon as possible.

4. Some real estate agents will not start the process of searching for homes until you have a pre-approval.

5. If by chance you do not qualify for a home loan at the time of the pre-approval, your lender can guide you in the right direction to prepare you to purchase in the near future. Sometimes there are items on the credit report that can be paid off or disputed to help you to qualify. Without sitting down with a lender, you would not have known about these issues until you are in escrow, which would either delay the close of escrow or cause the property to fall out of escrow.

6. You will learn about the lenders guidelines on locking in an interest rate. When can you lock your loan and for how long.

7. You will be able to relax and know that you have your financing in place when you find the right home for you.

The pre-approval process may sound like you are putting the cart before the horse, but in reality it is ensuring that you are buying within your means and gives you the opportunity to understand the different loan options available to you.

The pre-approval process may sound a little daunting, but it is a necessary step that is needed in purchasing a new home.

Patricia Barmatz has been working in the mortgage industry for the past 24 years and specializes in FHA home loans, VA home loan, conventional & jumbo loans. To visit her website, please go to http://www.yourmtglender.com .

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Mortgage Refinance – Determining Your Home’s Value First

Mortgage Refinance – Determining Your Home’s Value First

By: Matt Borkowski

Perhaps you are looking to refinance your home as rates continue to drop. With this crazy real estate market you may be worried about your home value if you choose to go forward with a refinance.

One thing I want you to understand is that you are much more involved in your home than the lender will ever be. The lender simply wants to refinance your mortgage and have that loan backed by the true value of the home.

To do this the lender is firstly interested in factual data. It is secondly interested in a licensed appraiser’s fuzzy opinion.

Most residential property valuations are based upon the market analysis approach. What this means is the lender wants to find similar properties as yours which have sold recently (ideally 6 months of less) within your subdivision or up to about one mile away from your home.

A similar property to yours is self explanatory. A perfect comp would be a replica of your home in your subdivision.

What you want to do is to avoid websites which claim they can do instant comparables for you. They are totally bogus, and I haven’t seen one that is even close to accurate.

The next thing you can do is go down to the appraisal district or recorder’s office and find similar sold properties to yours in your subdivision and surrounding area within the last 6 months. The folks there can help you do this. You want to make sure you have similar square footage, similar structure, and the comps were built within a 5 year window of your home.

The second part of the equation is that mortgage companies do rely on the appraiser’s fuzzy opinion. This is all about the added value an appraiser gives the home based upon its location, lot size, upgrades, and floor plan. This is very subjective which is why lenders go mainly on data.

When determining this you cannot give dollar for dollar increases in value if you happen to put hard wood floors in your living areas. At best you can give it 50 cents per dollar. And don’t give your pool more than $10,000 in value. I know it was $30,000, but that’s the way it goes.

If you want to save yourself tons of time and really get a bird’s-eye view of your home’s value call up your realtor and have her do a comparative market analysis. It takes her 5 minutes to do this, and she will probably be able to give you a better idea of value than you could anyway.

Head to Matt's website for Austin mortgage and home loan refinance. Also, for you Texas reverse mortgage folks, get one heck of a guide right here.

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