If you are considering purchasing a home or refinancing you can go to quickenloans.com or lendingtree.com along with local mortgage lenders in your area—to determine what loan will best suit you and your family. You can compare closing costs, APR's and Par rates to determine what loan will best serve your—and your family's long-term interests.
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HOME LOAN PRE-APPROVAL
Many potential home buyers have posed the question of why home loan pre-approval is so important over the last twenty years or so.
First, I would like to congratulate those who have properly maintained their credit and saving properly during this time. However, the fact is that “home sellers” do not know that you (or others) have a good job or good credit.
By obtaining pre-approval prior to your home search you do the following:
1) You let all home sellers know that you are serious and you intend on following through on all offers that you submit.
2) You show that you respect not only your time, but that of your agent and all parties involved. Nothing is worse than a real estate agent showing property to a client and they are unable to close due to financing.
3) You do not waste your time, nor do you have misguided expectations that can lead to disappointment and embarrassment. Once you know your situation upfront—you can do the proper planning that is needed to get in a more favorable buying position.
4) You increase the odds significantly that your home will close because the lender already has the required documents and information.
5) Be aware that a home loan “pre-qualification” is not as strong an indicator of your personal financial strength as a home loan “pre-approval” because a firm offer of credit is not specified.
A home loan pre-qualification is only as good as the information you provide.
If any of the information that you provided is incorrect or misleading it could lead to the denial or complication of your home loan.
Over the years we have found that those who get home loan pre-approval and go on to home ownership find the experience more rewarding—as they begin and end their home search—because they were searching for homes in their "true" price range.
In addition, those who were pre-approved on the front-end found home ownership more rewarding and they were usually more open to strategic financial planning that would keep them in a winning (positive) financial position throughout their lives.
This was a constant whether home buyer’s purchased a $200,000 home or one that sold for over one million dollars.
By viewing and analyzing houses that a potential purchaser feels they know they can—or will own in the future they create a favorable and inspiring environment!
That favorable environment will be felt by not only the buyer(s) and their agent—but the seller(s) as well—as the seller’s know they are dealing with a serious potential home buyer!
Most importantly—Pre-Approval gives the potential purchaser (you) the confidence that you can financially close the deal, you will not be wasting anyone’s time and you will be looking at houses in your "true price range."
In addition, you will be in a stronger (negotiating) financial position than potential home buyers who are Pre-Qualified—or worse yet—not qualified at all.
By getting a home loan pre-approval on the front end you will be much closer to your home ownership dream and enjoying life on your terms.
You will avoid the embarrassing scenario of getting your (and your families) hopes up and then not being able to close due to your home loan not being approved.
Other Home Loan Considerations:
Keep in mind that the above discussion is primarily for home buyers who are looking to buy a home in a normal market with traditional sellers.
Also keep in mind that even with a home loan pre-approval there is still the potential for the loan to fall through. However, it is a rare occurrence and has never occurred with buyers that I have represented over the past 20 plus years.
If you are in a market with a lot of foreclosures, short sales, new homes, government owned homes or you plan on purchasing your home where you will be using down payment assistance or other seller incentives—a pre-approval—may—or may not be in your best interest from a purely financial position.
Because you wouldn't know if you would be purchasing from a traditional seller, bank—new home builder—or government agency—you wouldn't know the best type of loan product to choose—prior to entering into a contract to purchase.
You may be offered incentives (depending on the seller) that could save you thousands or tens of thousands—depending on the incentives and the purchase price!
Therefore, it is wise to know your market—and the type of purchase that you will make on the front-end to determine the best approach to take.
In some markets you may have no way of knowing that on the front end!
NOTE: If you anticipate purchasing your home in a traditional manner (from a home seller) it may be wise for you to comparison shop on the front end.
By choosing among 3 or 4 lenders (don't give out your social security number or have your credit pulled at this point) and comparison shopping—you can decide which company to choose for your home loan and then get pre-approved prior to house hunting—if it is in your best interest to do so!
Be sure you know how to properly shop for a mortgage loan prior to getting pre-approved!
However, for most home buyers a home loan pre-approval is a wise choice and one that can reduce the stress of a home purchase significantly for all parties involved!
About This Article:
The above article was written by Thomas (TJ) Underwood. Thomas (TJ) Underwood is an active real estate broker in the state of Georgia and is the writer behind The Wealth Increaser, Home Buyer 411, Home Seller 411, The 3 Step Structured Approach to Managing Your Finances, Managing & Improving Your Credit & Finances for this MILLENNIUM and CREDIT & FINANCE IMPROVEMENT MADE EASY—FREE GUIDE.
He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future.
You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page.
Learn how to apply the— “Keys to Success”—in your life