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Getting Pre-Approved for a Mortgage
Getting a pre-approval to buy a home is not
something to save for the last minute. It should be
one of the first things you do - for several
reasons. The first an obvious reason is that you
need to know how much you can spend. Note that you
may be approved to spend more than you want to spend
or, approved to buy above your comfort zone.
Speaking with a bank, lender or mortgage broker is
free and the education is priceless. You can talk
over how much money - to the penny - you want to
devote each month to all of your bills (not just
your mortgage payment). The lender will listen to
you and then tell you what price range you should be
looking in. There are several reasons to get
pre-approved early but first let me discuss the
difference between a pre-approval and a
pre-qualification.
Pre-Approvals vs. Pre-Qualification
There is a difference between being pre-approved
and pre-qualified. You can get pre-qualified in as
little as a few minutes by simply telling a mortgage
broker verbally how much you earn, what your income
is, your debt, and giving him your social security
number so that he can do a quick credit check. This
is not a pre-approval. Although some banks and
lenders us the term interchangeably (and they
shouldn't), a genuine pre-approval is when you have
submitted copies of your most recent W-2 or 1099
statements (or completed tax returns), recent pay
stubs showing how much you bring home, and recent
bank statements showing your assets and/or
liquidity. If you were a seller, you probably
wouldn't want to take a pre-qualification where a
buyer only gave his assets and income verbally as
opposed to submitting written documents as proof.
While it's not hard to get this paperwork over to a
lender, it may be a bit time consuming - especially
if your documents are not handy. For some buyers,
it's even a little stressful. It’s all the more
reason to get it out of the way early so that you
can concentrate on the homes you’re seeing. When you
do fall in love with one home and decide to make an
offer, you'll have your paperwork in order and can
focus on the excitement and joy of putting in an
offer. I can tell you from experience, the
alternative is no fun when a buyer is scrambling to
get paperwork together at the last minute.
Your Time Won't Be Wasted
When you are clear about how much you can safely
afford to spend, you won't spend time seeing homes
that you cannot afford. You'd be surprised how many
buyers look in the wrong range and then have huge
disappointment when they get pre-approved only to
find that they need to look at smaller, less
expensive homes. It's very difficult to find out
that you've wasted weeks looking at something you
cannot have.
Stronger Bargaining Position
Getting preapproved helps to signal to the
seller that you're serious about the buying, and
that may give you an edge when making your offer. In
fact, most sellers in the Essex County, NewJersey
will not consider accepting an offer without one.
Additionally, some sellers may even require that you
are pre-approved for a loan before they'll allow
your realtor to show you the property.
Faster Closing
Because you've already completed part of the
process by getting pre-approved, closing on a home
can be quicker and you'll experience fewer delays as
you wait for your 'final mortgage commitment' to
come in on the property you plan to buy. |
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