Pre-qualifying Takes The Stress Out Of Home Buying
Close your eyes and picture this: Your spouse just got a huge raise! What is the first thing you are going to do with it? Finally move out of your apartment/duplex/mom and dad’s spare bedroom? That’s what we thought.
So, you go online and start looking in your price range. You find a few nice homes, but you notice that the homes in the higher price ranges look even better. More bedrooms for your future kids, right? Plus, you might be visited by a flurry of out of town guests on a regular basis. You hop in the car and start visiting different properties and you make a list of upcoming open houses to check out.
Stop right there. You could be making the big mistake that many homebuyers fall into, especially first-time buyers—getting your heart set on homes in a certain price bracket before being pre-qualified for the loan you would need to afford one. Not only do you risk wasting time by counting your chickens before they hatch, but you also risk being disappointed—there is nothing worse than becoming emotionally attached to a dream property, only to find out that, even with a larger paycheck, you can’t get approval for a loan to pay for it. Lastly, jumping the gun and signing a sales contract without being pre-approved will cause you to lose money on a deposit, home inspections and appraisal fees if you later find out that you can’t afford the home. Ouch! This is why, before you even take a peek at a property, it’s wise to pre-qualify first with a lender.
By reviewing some basic preliminary information, a lender can help determine what you can afford in terms of property and the size of the mortgage to go with it. Just because you played with a mortgage calculator and saw that you may be able to make the monthly payments for a $500,000 home doesn’t necessarily mean you would get approved for a loan of that scope. There are many other factors in addition to income which determine your eligibility for a loan, including credit history, debt to income ratio, length of employment, down payments, etc.
So How Do I Get Pre-qualified?
Pre-qualifying is not a very difficult process and, along with helping you understand what you can afford before you start looking for a home, it can also help get the ball rolling (in terms of paperwork) for when you formally apply for a home loan. Essentially, you give a lender your name, income, assets and credit history. The lender will check your credit score to make sure there are no major red flags, and then they will discuss the different loan options available to you. At this point in the process it is important that you are completely honest about any financial discretions you have committed in the past. They will probably surface anyway, but being upfront can help the process move more smoothly.
Not only does pre-qualifying give you more confidence in what you can afford, but it also positions you as a more attractive buyer as you can tell your real estate broker or agent that you initially cleared your price range with a lender.
Head Vs. Heart
Sure, buying a home is an emotional decision. When you walk into a home that feels just right, it’s hard to keep yourself from dreaming about what your life could look there with your family in tow – it’s a psychological phenomenon that is difficult to avoid. But remember, obtaining a home loan is not about emotions, it’s all about numbers on paper. Do yourself a favor and check the numbers before you start dreaming, so that you can create the right expectations for the type of house you can afford. Then go out and find that house, walk through it and experience that warm fuzzy feeling knowing this is exactly what you are looking for, and you have the pre-qualification to prove it! The experience will feel so much better knowing that you completed your loan homework ahead of time. Happy house hunting!
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Happy house hunting!