Getting Pre-Approved Should Always Be Your First Step
In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the
number of homes for sale. This has led to a competitive marketplace
where buyers often need to stand out.
One way to show you are serious
about buying your dream home is to get pre-qualified or pre-approved for
a mortgage before starting your search.
Even if you are in a market that is not as competitive, understanding
your budget will give you the confidence of knowing if your dream home
is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your
lender to get pre-approved before you begin house hunting. Pre-approval
will tell you how much home you can afford and can help you move faster,
and with greater confidence, in competitive markets.”
One of the many advantages of
working with a local real estate professional is that many have
relationships with lenders who will be able to help you with this
process. Once you have selected a lender, you will need to fill out
their loan application and provide them with important information
regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
*Capacity: Your current and future ability to make your payments
*Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
*Collateral: The home, or type of home, that you would like to purchase
*Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of many steps that will show home sellers
that you are serious about buying, and it often helps speed up the
process once your offer has been accepted.
Bottom Line
Potential home buyers overestimate the down payment and credit scores needed
to qualify for a mortgage today. If you are ready and willing to buy,
you may be pleasantly surprised at your ability to do so.