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Preparing to Buy

Before you start shopping for your property, it is a good idea to make some preparations.

Pre-Qualification vs Pre-Approval

A pre-qualification requires you to discuss with a lender your finances. After discussing your income and assets, and your overall debt, your mortgage lender or loan officer will provide you with an idea of your mortgage qualification limit. You will discuss your goals or needs regarding the type of mortgage option you seek or need. Here’s where your lender will explain the various mortgage options available and recommend loans that are best suited to your unique situation

If you are unable to discuss this in person, many lenders can pre-qualify you over the phone. Some lenders offer this service via the Internet, too. Usually, mortgage lenders do not charge for the pre-qualification process.

One key point: lenders do not review your credit report or provide an in-depth look at your ability to purchase a home—ability to repay a loan—and risk of default. Pre-qualification does not mean your pre-qualified loan amount is guaranteed. It is simply a guide to how much house you may be able to afford. A pre-qualified borrower does not carry as much influence with a seller as a pre-approved borrower.

While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. You’ll also avoid being disappointed when going after homes that are out of your price range.

With a Pre-Approval, the buyer actually applies for a mortgage and receives the Pre-Approval in writing from a lender. This way, assuming the home you’re interested in is at or under the amount you are qualified for, the seller knows immediately that you are a serious buyer for that property.

Build Your Mortgage File

A mortgage file contains all your important financial documents. You will need it to secure financing for your property. The typical mortgage file should contain:

  • Financial statements
  • Bank accounts
  • Investments
  • Credit cards
  • Auto loans
  • Recent pay stubs
  • Tax returns for two years
  • Copies of leases for investment properties
  • 401K statements, life insurance, stocks, bonds, and mutual account information.

Be Careful With Your Finances

Now is not a good time to make sudden career changes or large purchases. You want to approach your property purchase from a position of financial stability.

ContactThe Sam Joseph Team