What is the first step when it comes to buying a home? For most people, buying a home requires getting a mortgage loan approval first. The lender will evaluate your situation and give you a guideline of how much house you can buy and you can decide if this will fit into your situation. It is important to have a loan approval before you start searching for a home so that you will be able to act quickly when the perfect home is discovered. Follow these guidelines to get a favorable response to your loan application.
Approach the lender with a well organized folder containing copies of your last two years’ tax returns; three months’ worth of bank statements; proof of your current employment and income; investment statements; a list of your debts and assets; and your credit report. Verify in writing the source of your cash funds for the down payment and closing costs.
Work with your lender to achieve a realistic picture of how much house you can afford. Look at the home loan as a long range investment, a monthly expense you want to be comfortable with for a number of years. Don’t make the mistake of trying to over borrow.
Your goal is to obtain a letter of pre-approval from the lender that states how much money they are willing to loan to you for your home purchase. Request a written “good faith” estimate of your closing costs so you understand all the lender’s charges. The difference between pre-qualification and pre-approval is important to understand. Getting pre-qualified is as simple as having a loan representative determine a price range based on your statement of available funds, income and debt. A quick review, and the mortgage broker can issue a letter of pre-qualification. The next step would be to authorize a credit report, (they would want to do one of their own), provide bank statements, tax returns and W-2s for documented pre-qualification. Once the information is reviewed and approved, the lender has definitely committed to lending the buyer money once the house is approved. It’s a pledge to loan, and unless there are changes in your financial picture, it is like money in the bank.
With this document in your hand you can shop for a home with confidence and it will set the seller at ease knowing that they have a qualified buyer making an offer.
Ray Perry is the 2013 Realtor of the Year for Lake County and works for CPS Country Air Properties. He can be reached at 277-8000.
