Pre-Qualification and Pre-Approval Process

Pre-Qualification and Pre-Approval Process

Being a first-time home buyer means you will have a lot of questions and need help navigating the purchase of your first home. One of the biggest questions most first-time homebuyers have is, how much money can I afford to spend on a house? Which brings us to the first step to purchasing a home. This is one of the most important steps in the process of purchasing a home unless you plan on purchasing a property with cash. The first step to the home purchasing process even before finding the right Real Estate Agent to help you find your dream home is getting your finances in order and obtaining your pre-qualification and pre-approval from your lender. 

Analyzing finances

Before you reach out to a lender to get pre-qualified and get a pre-approval, you should look at your finances and see where you are financially before reaching out to a lender. Keep in mind that once you reach out to a lender, you want to at least make sure your credit is in good shape. Your credit score is a very important part of how much you can be pre-approved for as well as if you qualify for any down payment assistance programs and the type of loan that you can get. Take the time to pull your credit report and review it thoroughly. Check to make sure that items on your credit report belong to you, and if not get them taken off as soon as possible. Check your credit card balances and get them paid down and remember that during this process you do not want to apply for any new credit cards or car loans. You must take the time to check your financial health so that there are no surprises when your lender pulls this information.

Once you know where you stand financially, now is the time to take the next steps and reach out to a lender to get pre-qualified and start the pre-approval process. I know most people think that the pre-qualification and pre-approval are the same things, but they are not. Keep in mind that you can skip the pre-qualification process altogether and go straight into the pre-approval process if you prefer. Getting a pre-qualification is basically like getting an estimate. During the pre-qualification process, you will provide your lender with information regarding your debt, income, and assets. The lender will then take this information and give you a ballpark estimate of how much you can borrow for your home loan. When you get a pre-qualification, just know that the amount that your lender provides you with is not a set-in-stone amount. The amount that they come up with is based on the information that you have provided to them. At this point, the lender has not pulled your credit or truly required any documentation from you. This just allows you to see a ballpark figure of what you could afford. But know that you have this information you can now move on to the pre-approval process.

Getting your pre-approval, is a must. Your pre-approval should l be submitted with any offer that you make on a property. To start the pre-approval process, your lender will have you complete a mortgage application.  Once you have completed the mortgage application your lender will begin digging into your financial history. First, the lender will run your credit and they will request supporting documents for your income, assets, and credit. Once your lender reviews this information thoroughly, they will determine what loan amount you qualify for, what your interest rate will be, and what loan type would best suit you. At this time, you can also speak to your lender about any down payment assistant programs that your state may have. At this point, your lender will provide you with a pre-approval letter that you will need to make sure you have on hand when searching for your home. Having your pre-approval letter available can give you an advantage when making offers on houses. It shows the seller’s that you are serious and are ready to go if the offer is accepted.

In conclusion, it is important to know your financial health to determine where you stand with beginning your pre-qualification and pre-approval process. Once you know you are ready to move on to getting a pre-qualification and/or a pre-approval, take your time to find the best lender for you. Your lender will get to know you very closely as they dig through your finances and help you get the financing you need for your home. Feeling comfortable with your lender will help you as you go through your home buying process.

Leave a Reply

OPEN AN ESCROW TRANSACTION

Oakwood Escrow aims to make every transaction as simple, secure, and smooth as humanly possible. The easiest way to open an Escrow transaction with us is by using the form below, or contact us at (619) 430-4584.