It is the time of year when buyers are excited - they've been looking at homes online and are ready to start scheduling showings. When they find one they like, many first-time buyers are not sure how to proceed, and think they'll write an offer and worry about obtaining a mortgage later. How does the process really work? It turns out, planning your payment strategy in advance saves time, money, and effort for everyone involved.
While your home search will probably start online, you might find yourself calling agents for more information on certain homes. Be prepared for this question - "If you don't plan to pay cash for the home, have you talked to a lender yet and gotten prequalified or preapproved?"
Prequalification and preapproval are two different things, and both start with talking to the mortgage loan officer at your bank. With prequalification, the lender takes your word at face value regarding income and credit score. Preapproval means your bank is checking your paystubs, W-2 forms, credit report, bank statements, and more to make sure you are actually eligible for the estimated loan amount. It takes more time than prequalification, but involves much more thorough and in-depth research into your financial standing.
You should get preapproved for your mortgage for several reasons:
- You'll have a place to start! Knowing what you can and can't afford is the single most important factor in narrowing down your home search. If you're looking at $225,000 homes and end up approved for $124,000, you are going to be extremely disappointed.
- Your agent will be able to guide you. Not knowing a couple's budget restrictions can lead to frustration on both ends - the agent may be sending you irrelevant homes that are outside your budget, and you may be taking them on a wild goose chase for something you can't afford.
- You can act quickly and decisively, knowing you are prepared to buy within your preapproval amount.
Keep this in mind as you continue your home search, and email me at firstname.lastname@example.org for a list of lenders in our area. After years of working with banks and credit unions, I can help you narrow down which ones will fit your needs and have your best interests at heart.