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You’re buying a home for the first time and you don’t want to just stumble the whole way through it. Good! After all, there is a lot of time and money at stake, and you’re smart enough to value what you have.
This guide is here to help you get it right the first time. If you’re planning on getting pre-approved for a mortgage, we’ll walk you through the things that every first time homebuyer should know in 2022.
Whether you’re just starting to look at houses, you’ve got choices narrowed down, or you’re ready to make an offer, you will need pre-approval through for any of your home searching to matter.
Pre-approval isn’t difficult, but it is possible to hit unexpected road bumps that can delay you from taking your next step if you’re not handling the pre-approval in advance.
Plus, if you’re competing with other offers from borrowers who are already pre-approved, the seller is very likely to simply choose another buyer rather than wait for your pre-approval to come through.
In fact, there’s no reason not to get pre-approved right from the beginning of your search, even if you’re unsure whether you’ll be buying at all. The best mortgage companies don’t charge for pre-approval, and there shouldn’t be any up-front costs until you’re ready to move forward with a particular home.
Why do sellers and realtors want my pre-approval so badly?
In the past, subprime loans meant that buyers who could barely afford a home were still allowed to take out a mortgage loan. Banks simply didn’t expect to lose money on these purchases, so sellers could expect most home offers to be legitimately backed by a lender.
Ever since the housing bubble burst of the last decade, fewer buyers qualify for loans. Of course, even if you easily qualify for your target price, the only way to prove that to the seller is with a loan pre-approval letter.
Realtors and sellers don’t want to waste their time with unqualified offers, and certainly don’t want to risk waiting too long to accept a competing offer because they put faith in something you couldn’t get approved for.
It may sound like a lack of faith, but the reality is this: Getting pre-approved is easy, so sellers and realtors expect you to do it right away.
Since getting pre-approved for a mortgage is so easy, sellers and real estate agents have come to expect you to do it right.
Every mortgage company has its own process, but all companies will want you to do the same things. In order to loan you money, lenders want to know a few things about you.
Mortgage companies are going to need this information to actually make a valid decision:
Naturally, you may not have all of these things immediately on-hand. That’s okay! Start with what you have and be prepared to gather more later.
The key is being prepared to give as much accurate documentation as possible. If you know you’re going to get a VA loan, for example, you’re going to need your service record. If you don’t have a current and valid ID, you’ll want to get ahead of the curve.
The rest is easy. Simply find an application for a mortgage company you are interested in working with, and fill in the blanks. You may not even be able to fill out everything at once, but once you submit the application, a loan officer should get back in contact with you for further clarification.
To make progress, you’ll want to provide the absolute best contact information with your application. Regardless of how sociable you may feel, the mortgage process requires two-way communication.
How much communication will there be during the pre-approval?
Most of the process is done either online or by telephone. Some hybrid companies allow fluctuation and choice, while others have a fixed process demanding either phone or internet contact for certain stages.
Each person’s circumstances are different, but here are the primary factors:
No matter what form of communication you use, you’ll be notified once you’re pre-approved. Most pre-approvals will take 1 to 3 business days, depending on volume.
The mortgage company will send you a pre-approval letter, which you can then use to prove your qualification to sellers.
Here’s what your pre-approval will look like:
Being pre-approved does not mean that you have locked in any sort of mortgage interest rate.
Being pre-approved can give you the leverage to have your offer accepted by a seller over other interested buyers, Earlier in this guide, we mentioned that lacking pre-approval might mean that another offer will get accepted over yours. The inverse actually works in your favor! Being pre-approved can actually position you to be the accepted offer over another buyer who isn’t pre-approved. At worst, you’ll be on a level playing ground.
The next steps after pre-approval are locking in your rate and closing on your loan. Locking means that you have selected a property, made an offer, and the offer has been accepted.
Rate locks are good for a limited amount of time, but you should always lock your rate early. Rates can’t drop below 0%, but they can sky-rocket higher without notice.
Closing means that you will sign the contractual documents to make your mortgage loan official and binding.
After closing, you will own your first home!
While you can technically apply anywhere just to find out more, it’s healthy to make sure that your potential mortgage company matches the things you value most.
Pre-approval letter:
After pre-approval, the mortgage company can provide this document, physically or digitally, which assures the borrower and real estate agent that a loan will be available up to a specified amount. Some pre-approval letters specify certain loan programs as well. The validity depends on the accuracy of the information provided during application, and expires when the information changes over time.
Sub-prime loan:
This type of loan happens when a borrower’s monthly housing costs will be abnormally high compared to his or her income. A subprime loan has a higher risk that the borrower will fail to repay the loan, and is much less common now than in the previous decade.
Target price range:
Unfortunately, there is no magic number to help you decide what loan amount to apply for. A loan officer can help you narrow the range, but most applications ask what you want up front. Approach it this way: Even if a price seems out of reach, it’s always okay to apply for more than you need if you think you may consider a home at that cost.
Now you understand what you need in order to be approved for your first home! The next step is to think about who you want as your mortgage company. Learn why Samammish Mortgage is one of the top refinance mortgage companies in Washington and the Pacific Northwest.
Are you curious about mortgages, or do you want to learn more about available home improvement/renovation financing? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.