Wednesday, August 8, 2012

The Home Buying Process: Step 2

This is the second post of ten in a series about the home buying process.  The purpose of this series is to educate the reader on different steps in the process to ease any anxiety of the unknown.  Whether you are a first-time buyer or have purchased in the past, it is always advantageous to be up-to-date with the latest news and information to make your path to home ownership as smooth as possible.
Click here for Step #1

STEP #2:  Mortgage Pre-Approval

Not to devalue any other step in the process, but this step may be the most important.  You may have even initiated this step prior to your initial consultation with a Realtor because of the importance it has to your home search.  Which step you do first is a matter of personal preference.  

In this step you are going to visit with a lender to look at the landscape of your financials and determine how much you can afford when it comes to buying a house.  There are four things you should expect during this time... 

          1.  Credit report-  The lender will pull your credit report and review it for obvious reasons.  Be sure that you go over the report with them to ensure accuracy of the report.
          2.  Financial overview-  You will be asked to present evidence of employment, income, assets, and debt to determine what you can afford. 
          3.  Lender discussion-  Expect to spend 45 minutes or so with the lending professional.  This is the time for your lender to ask the questions he or she needs to get your approval through, but also it is a time for you to ask any questions of your lender.  Do not leave the meeting without getting your questions answered.  This is no time to feel uncomfortable or uninformed.  Discuss things such as monthly payments with the lender so that you are comfortable in the price range that you determine.  Remember that just because you qualify for a $200,000 home, doesn't always mean you want to spend that much.
          4.  A pre-approval letter-  You will receive a letter that details the value of the loan you are pre-approved for.  This does NOT mean that you will for sure receive a loan for that amount, but this is a commitment from the bank that basically states that they believe they would be able to get you a loan for that amount.  You'll still need to go through the application process once you find the home you intend to purchase.  

Once you receive the letter, present it to your Realtor.  This gives the Realtor the confidence that he or she is showing you homes in the price range that is appropriate for you.  Now you are ready to move on to step 3 where you'll begin your home search.  

Don't forget to read a my post about what not to do during the mortgage process.  Follow these tips once you have been pre-approved all the way through closing.  

Take care, 
Scott Morrison

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