So you’ve decided that it is time to buy your first home! This a huge milestone in your life. Buying a home is one of the largest financial decisions you will make in your life. The task can be daunting to even the most veteran of home buyers. There are a lot of things that home buyers should keep in mind. One of the biggest mistakes first-time home buyers can make is not knowing what they can afford. Before you even contact a real estate agent or start looking at homes to buy, get preapproved for a loan by a lender. This will save all parties involved, buyer (That’s you!), seller, and agent, a lot of trouble!
What is a mortgage preapproval?
A mortgage preapproval is a way to determine how much money the lender will let your borrow. The lender will look at your employment history and income, current assets, and credit score. Your lender will ask for some documentation from you, so it is important to have these things on hand
proof of assets
proof of employment
proof of income
It is important to start the mortgage preapproval process early. As soon as you decide that you want to buy a house, get a mortgage preapproval.
The importance of your preapproval letter
After you have been preapproved for a loan, you should receive a preapproval letter. This is important to have for two reasons. The first reason is that many real estate agents will not even show you houses without seeing the preapproval letter first. They do not want to waste their time or your time showing you houses outside of your price range. This is why you need to get preapproved at the start of your home buying journey. The second reason your preapproval letter is important is that a lot of sellers might want to see it. You can show them that you are able to buy their home and that you are serious about doing so. So, everyone wins whenever you get preapproved. You and your agent don’t waste time looking at homes outside of your budget, and the seller is able to show his or her home to potential buyers.
Things to remember after getting preapproved
There are a few important things to keep in mind after you have been preapproved. You do not want to make any large purchases or change jobs. If you think that you or anyone else on your loan will be changing jobs before you have purchased your home, wait until you have bought your home. When you get preapproved for a mortgage, the lender is looking at your past and current employment history. You may not be able to afford the monthly down payments with your new job. The fact is your lender doesn’t know if the loan would be a wise decision. So, just wait until you’ve closed on your new home to get that new job.
Another thing you want to avoid is doing anything that will affect your credit score. The preapproval process is not the only time your credit is run. You do not want to buy a car or a boat or anything that will change your credit score. Lenders will check your credit score before you close, and if it has changed much they may change the details of your loan.
Your first time home buying experience should be a great one. Even though it may seem overwhelming, taking the time to get preapproved and working with a real estate professional can make the process much more manageable.