If you’re thinking about buying a home lately you’re definitely not alone. It has been a seller’s market for many months now, which means more buyers than there are homes available. In such a competitive market, it’s important to have your “ducks in a row” before you start your serious home search. As a first-time or new home buyer that will need a mortgage to finance your home, you’re likely to hear a lot of words thrown around like “pre-qualified” and “pre-approved”. Despite how similar they sound, they are NOT the same thing.

Getting Pre-qualified

When you decide to take the next step from “just browsing” to speaking to a licensed real estate salesperson, one of the first things they may ask is if you are pre-qualified. This means contacting a lender to give you an idea of how large a loan you will likely qualify for, based on the information you provide such as total debt, income, and assets. The pre-qualification letter is a conditional commitment in writing for a ballpark estimate of how much you can borrow. This is very helpful if you are having a hard time scaling down your criteria for a new home, because the number you are given should be at the very top of your budget for a home. The pre-qualification process can usually be done over the phone or online, and there is typically no cost involved. know where to start.

What’s Next?

However, to seriously begin the home search process, you need to fill out an official mortgage application to get pre-approved for a more definitive loan amount. The pre-approval process is more in-depth and involves a credit check of ALL borrowers as well as providing your lender with all necessary documentation to perform the credit check. The pre-approval process also gives a good idea of the interest rate you’ll be charged. Getting pre-approved is necessary if you’re going to be financing your home.  A pre-approval lettter is required when submitting an offer to purchase a home.  Thus, you need to secure a pre-approval letter prior to beginning your search for your new home.

TAKE NOTE:

Once you have your pre-approval in hand, this does not give you a green light to be careless with your finances. Your credit profile will be run again before closing to ensure of no big changes so avoid even the smallest, out of the norm purchases like furniture or a car, and definitely don’t take out another loan or credit card. This can prevent you from closing on the home of your dreams!

Equally important, you should apply for loans with at least two lenders.  Thus, while Coldwell Banker works closely with Guarantee Rate Affinity (GRA) and have only had great experiences with Jon Smith over the years, you should consider other lenders when seeking a mortgage.  For your convenience, information on GRA is provided.

Questions? Please call Susan Berk so she can provide direction and assistance with this vital first step to buying a home.