know how much you want to spend. You even know how long you plan to stay.
it's time to make it all official.
Getting Pre-ApprovedIt's a key
Pre-Qualification vs. Pre-Approval
There is a
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
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.
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.
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.
Here is a quick look at some of the breaks given to first-time
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.
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
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.
this course you have learned about your needs. Here are some pitfalls to keep
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.
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.
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
Are You More Secure About What You Want?
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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