Question: I want
to start looking
for a home, but
several people
suggested
to start looking
for a home, but
several people
suggested
agents won't
take me
seriously
without a
pre-approval
letter.
take me
seriously
without a
pre-approval
letter.
I understand
the pre-
approval must
be updated
every 30 days,
and a credit
check hurts my credit score.
How do I avoid being punished for planning
ahead and beginning my search far in advance
of the target move date?
the pre-
approval must
be updated
every 30 days,
and a credit
check hurts my credit score.
How do I avoid being punished for planning
ahead and beginning my search far in advance
of the target move date?
Answer: A pre-approval from a mortgage lender has
gained more importance in real estate transactions
than ever before. There are many reasons that
gained more importance in real estate transactions
than ever before. There are many reasons that
reward you, not punish you, for making the effort
toward mortgage loan pre-approval.
toward mortgage loan pre-approval.
It is a wise move to start your search early. You do
not have to update your pre-approval status if your
circumstances to not change, and the effects of
not have to update your pre-approval status if your
circumstances to not change, and the effects of
a lender verifying your status while you shop for a
mortgage will have little impact on your credit score.
mortgage will have little impact on your credit score.
A formal loan application for a loan on the property
you ultimately chose, subject to financing, is the only
other time you will have to circle back.
you ultimately chose, subject to financing, is the only
other time you will have to circle back.
Lenders have different criteria in determining buying
power, so that pre-qualifying will go a long way toward
a positive experience. Here are the key benefits
of pre-qualification:
power, so that pre-qualifying will go a long way toward
a positive experience. Here are the key benefits
of pre-qualification:
• You know in advance what you can afford.
• You save time not looking in the wrong price
range.
range.
• You get the lender's perspective of the local
marketplace.
marketplace.
• Your future agent will see your pre-approval
as a positive sign you are serious.
as a positive sign you are serious.
• A source of financing can influence the seller's
reaction to an offer.
reaction to an offer.
• It can lead to a more efficient and faster closing.
• you learn about the financial alternatives available
to you and have time to consider them.
to you and have time to consider them.
After you have been pre-qualified and found the
right home, you will have to fill out an application
and submit the information you initially
right home, you will have to fill out an application
and submit the information you initially
collected, plus depending on when you buy,
underwriting will most likely request updated
and additional data.
underwriting will most likely request updated
and additional data.
Your financing source
There are many aspects to consider before you
pick a lending source. Do an Internet search for
reviews on the lenders. Changes in government
oversight of lending rules and procedures have
stiffen and in many cases created an atmosphere
where obtaining a home mortgage is more difficult.
For example, late payments may result in higher
interest rates. When choosing a source you should
consider how competitive their rates are; the types
of mortgages they offer, specifics on each loan,
the cost to borrow and how they service their
pick a lending source. Do an Internet search for
reviews on the lenders. Changes in government
oversight of lending rules and procedures have
stiffen and in many cases created an atmosphere
where obtaining a home mortgage is more difficult.
For example, late payments may result in higher
interest rates. When choosing a source you should
consider how competitive their rates are; the types
of mortgages they offer, specifics on each loan,
the cost to borrow and how they service their
loans. Seemingly tiny differences can have a big
effect on the cost or convenience of a loan product.
Here is a starter list of questions to ask.
effect on the cost or convenience of a loan product.
Here is a starter list of questions to ask.
• What different types of mortgages do you offer?
• Do you sell the mortgage after you have originated
it? If so, who services the loan going forward?
it? If so, who services the loan going forward?
• Do you provide a written estimate of the monthly
payments and a breakdown of the closing costs?
payments and a breakdown of the closing costs?
The lending process can be confusing because
loan officers will spend time and energy trying to
convince you they are the best mortgage source.
But when their underwriters spend even more
loan officers will spend time and energy trying to
convince you they are the best mortgage source.
But when their underwriters spend even more
time asking follow-up questions and challenging
your application, it can be confusing.
your application, it can be confusing.
Conflicting signals are due to the complementary
roles the loan origination (sales), and underwriting
(risk control) functions play within the organization.
Just being aware of the conflicting positions
roles the loan origination (sales), and underwriting
(risk control) functions play within the organization.
Just being aware of the conflicting positions
may help in cutting down on the frustration it can
cause.
cause.
What to expect
Mortgage lending is an extremely competitive field,
and it will pay dividends to shop for a loan. You
want lenders to compete for your business.
and it will pay dividends to shop for a loan. You
want lenders to compete for your business.
There are many sources of loans that will reveal
themselves when you use the tools available to
seek them out. In addition to banks and credit
unions, mortgage brokers have many loan products
and specialize in mortgage loans only. They are
strictly commission-based and work more like real
estate agents.
themselves when you use the tools available to
seek them out. In addition to banks and credit
unions, mortgage brokers have many loan products
and specialize in mortgage loans only. They are
strictly commission-based and work more like real
estate agents.
Online mortgages are available and underwritten
by some of the largest financial institutions in the
country. VA mortgages are available for many
veterans with no downpayment required.
by some of the largest financial institutions in the
country. VA mortgages are available for many
veterans with no downpayment required.
A common error in lending happens after the
pre-approval of a home loan. The buyers purchase
a car before the closing! The lender rejects the
closing because their circumstances have changed.
This circumstance and others have killed
pre-approval of a home loan. The buyers purchase
a car before the closing! The lender rejects the
closing because their circumstances have changed.
This circumstance and others have killed
many closings. Don't let it happen to you.
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