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Courses in this Department


How Ready Are You to Buy a Home?

Determining Your Dream Home and Finding It!

Factory Built Homes Are Worth a Look

Purchase Manufactured Homes with FHA Loan

How to Buy a Foreclosed Home

Pros and Cons of Corner Lots

Know the Neighborhood Before You Buy

Tune in to an Open House on the Radio

Finding a Qualified Broker or Agent

Shopping for a Loan and Choosing a Lender

How to Improve Your Credit

How to Survive the Loan Application Process

Making an Offer and Signing Contracts

Cancel Your Contract in 3 Days

Understanding the Closing/Settlement Process

Choosing Home Inspection and Settlement Professionals

Double Check Your New Home - The Walkthrough

Know Your Consumer Rights

Seniors Have Many Housing Opportunities

Preparing for the Big Day -- Relocating Moving

Make Your Home Your Castle - Cost Effective Redecorating Ideas


 

Getting Pre-Approved

You know how much you want to spend. You even know how long you plan to stay.

Now it's time to make it all official.

Getting Pre-Approved
It's a key element.

Pre-Qualification vs. Pre-Approval

There is a BIG difference.

When you start looking at houses, every agent you talk to will ask if you are pre-qualified for a loan amount or pre-approved. This tells them how much you can afford and how far along in the process you are.

Here are the differences between being pre-qualified versus pre-approved:

To pre-qualify, you must submit general information about you and your finances to a lender. The lender will determine a pre-qualification loan amount based on this unqualified information. This is a general amount that still needs to be confirmed with verified financial data and a credit check. A pre-qualification amount does not indicate how much your loan amount will actually be after points and interest rates are finalized. It basically offers a price range in which you can start looking. But the amount can change. In many cases, the pre-qualification range is actually lower than the actual loan amount. Most lenders would rather offer conservative estimates than have to lower the amount based on verified data.

A pre-approved amount (which is verified in a letter from the lender) is a much better gauge of your price range. A letter is only offered after you have submitted verifiable data and a credit check is run. A pre-approved letter from a lender is a document stating that you can obtain a loan for the specified amount in the letter from the lender offering the letter. This tells an agent that you are a no-risk buyer because they know that an offer from you will not fall through in the loan process. This makes the settlement process a lot easier and faster.

The Big Reason You Want to Be Pre-Approved
Commitment.

Pre-approval is a commitment on both sides. First, you agree to a loan with that lender. Second, that lender agrees to give you a loan for that amount. There is also a fee associated with a pre-approval. You must give the lender a check for the credit report and financial analysis. They will often request two to three months bank statements and proof of income.

Getting pre-qualified or pre-approved helps you know what you can afford. The pre-approval process will let you know if you need more time to clean up your credit or increase your income to buy the type of home you want most.

Beginner's Luck

If you are a first-time buyer, you may have some breaks in store for you. Unfortunately, many of these do not apply to seasoned owners. But let's look at some of the breaks you can find as a first-time buyer just for a reference point. These breaks can help raise a pre-approved amount significantly.

First Time Buyer Breaks

There are some great incentives to buying your first home.

The Breaks

Here is a quick look at some of the breaks given to first-time buyers:

Your financial status isn't the only determining factor in finding the right home. The type of loan you choose can make a huge difference.

There are several types of loans available for first time homebuyers that make purchasing your first home a little easier.

Here are some of the loans that may be worth some research:

The Federal Housing Authority offers a FHA first-time homebuyer loan that requires as little as three percent down and a low introductory interest rate. The loan is an adjustable rate mortgage (ARM) that gives you some time to get into the habit of paying a mortgage. The interest rate can go up each year for the first five years. Be sure to talk to your lender about the caps and rates.

Fannie Mae also offers first-time buyers loans that require little down and low introductory interest rates. They also offer an Energy Efficient Mortgage Program (EEM) that helps homeowners save money on utility bills by financing the cost of energy-efficient features to new or existing homes. This type of loan can be built into a new mortgage or a refinancing of an older mortgage. By lowering the cost of utility bills, your ability to afford a higher loan may mean the difference between getting a home or not. A Government Insured Loan Program offers mortgages through lenders that offer better terms, rates and requirements than typical loans.

If you are willing to take on a fixer-upper home, you could take advantage of a 203(k) loan.

Check Into Them
Do some investigating.

There are many options in loan types that are designed to get people in homes. Talk to your lender about various options. Also note that each lender will have different packages and loans to offer. It may be worth talking to a couple before settling down with one loan type. There are also some variations on these loans that may be worth asking about if this isn't your first home. You can still find good deals.

The Pitfalls:

In this course you have learned about your needs. Here are some pitfalls to keep in mind:

1. If you don't know what you want, you may need too much time to make a decision and lose a house. Many markets are quick-paced and require a quick-thinking buyer. Be prepared before you shop.

2. Keep your options in mind. Don't turn down a house just because it doesn't meet your vision. You may be able to remodel it to perfection.

3. Remember your time line. Don't overspend on a home you plan on abandoning within five years.

4. Forget the nine rules of house hunting and you could regret it. These guidelines will keep you in peak shape for this particular task.

5. Be practical. Make lists of your wishes, wants and needs to keep you on track.

6. Ignoring that gut instinct that says to keep looking may come back and haunt you if you ignore it. Be sure to trust yourself when looking for a home.

7. Get pre-approved not pre-qualified if you want to take action and get your dream house. If you take too much time, you may just lose it.

8. Not looking at the various types of homes and their pros and cons could be a mistake. Don't work with pre-conceived ideas. Be sure to really check into the various types to see what will work best for you.

Are You More Secure About What You Want?

Time to take a quiz on what you've learned. Be sure to review the sections of the course related to your wrong answers!


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