Fall is the best time to buy a house. Sellers are more inclined to be more motivated to sell in the Fall. The peak seasons Spring and Summer have passed. With that being said, they
Is Mortgage Preapproval Important
Shopping for a home before getting pre-approved for a mortgage is the equivalent of walking into a grocery store without a wallet. Yet, the vast majority of homebuyers don't get a loan pre-approval for the house hunt.
So, what is a pre-approval? (For one, a pre-approval is different from a pre-qualification.)
Prequalification: A lender or REALTOR relies on information provided by the buyer to estimate how much the borrower could qualify for. You can do this online with a mortgage calculator.
If you earn $56,516 in annual income, that means your monthly house payment should be no more than $1,695, according to the 36% ratio rule. The rule, which measures your debt relative to your income, is used by lenders to evaluate how much house you can afford. You also must factor in Debt, this is where the lender considers the interest rate, credit score and other financial details.
Pre-approval: A mortgage lender verifies the borrower's information and documentation to determine exactly how much it would be willing to lend to that borrower. THIS IS A MUST HAVE FIRST STEP FOR SERIOUS BUYERS WHO ARE NOT PAYING ALL CASH.
The documents to get pre-approved are the same documents that you would need to get a mortgage.
Last 2 years' W-2s
Last 2 federal returns
Two months' worth of bank statements of all types of accounts
Your credit report
A pre-approval is not a loan commitment, but it helps speed up the underwriting and loan approval process, Roth says.
Here are five great reasons it’s better to get a mortgage preapproval before you go house hunting.
No. 1: The competitive market
Buyers often are eager to start looking at homes and tend to leave what they view as the boring, bureaucratic part of the home buying process for last, says Michael Highfield, associate professor of finance and head of Mississippi State University's department of finance and economics.
But in this competitive market, any serious buyer should pursue a pre-approval from a lender in advance to beginning a home search.
No. 2: Hardly anyone does it
Less than 10 percent of buyers who got a mortgage in 2016 got loan pre-approvals, according to Home Mortgage Disclosure Act data compiled by LendingPatterns.com. That percentage might be somewhat lower than the actual number of buyers who get pre-approved, some lenders say, because of differences in lenders' definitions of "pre-approval."
No. 3: No preapproval, no accepted offer
But real estate and loan professionals say it's common to come across buyers who skip the pre-approval process.
No. 4: You need to know where you stand
Some buyers put off the loan application because they fear a lender may not approve them for the amount they plan to spend to buy the house.
It's like when people don't go to the doctor for their annual checkup when they are afraid to find out what's wrong with them. That's the same thing with getting pre-approved.
Others simply don't want to share an abundance of private information with a lender until they actually find the home they want, he says.
No. 5: Loved ones can't approve you for a loan
It's typical for potential buyers to assume they qualify for a certain mortgage amount based on what a neighbor, friend or relative with a similar credit profile bought, Roth says.
A survey by NeighborWorks America found that nearly 4 in 10 people who are thinking of buying a home first seek advice from friends and family who own a home. Only 16 percent say they approach a real estate agent for advice in that early stage, and mortgage lenders are approached only 9 percent of the time, according to the survey.
You are beyond compare
Even if you pay your bills on time and earn about the same as the friend who just got that $300,000 mortgage, don't assume you qualify for the same loan.
A credit score difference of 700 to 680 can severely affect one's ability in terms of down payment.
Getting pre-approved before you shop for a loan also allows buyers time to fix unexpected errors on their credit reports.
There are 40 million errors on credit reports. You need to have time to fix that if you happen to be one of them. When you find the house that you want, you do not have time to get pre-approved, and if somebody else has it, there's no way the seller is going to look at your offer.
If you are ready to take the firs steps homeownership and have decided to shop for a home, call and let's sit down with a mortgage professional that can help you take the right step now. I have mortgage partners to fit any homebuyer situation.
Wayne Gaddy 843-603-5552
Experienced Top Producing Real Estate Broker/REALTOR® specializing in the Purchase and Sale of Residential Homes, Condos, Vacation Homes, New Homes and Investment Property. A Realtor® who has a prov....
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