Hey everyone today we’re going to talk about the first step in the home buying process and that’s getting pre-approved! It’s highly recommended that you work with your lender to get pre-approved before you even begin house hunting. A Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.
To get pre-approved, you’ll complete your lender’s loan application, providing them with important information about your credit, debt, work history, down payment, and residential history. This information helps your lender evaluate your 4 C’s to determine how much you may 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
If your lender determines that you qualify for a loan, they’ll provide you with a pre-approval letter outlining the maximum amount you are qualified to borrow. Keep in mind that the amount your lender is willing to lend is not how much you should borrow. You should only borrow what is comfortable for you, making sure not to overextend yourself. Also, be sure to ask your lender how long the letter is good for.
Now that you know how much home you can afford, you can begin looking for your new home with greater confidence.
So let’s recap:
-Getting a pre-approval is strongly recommended if you are a serious home buyer
-Your credit will play an important role in getting pre-approved – and approved
-Your pre-approval letter will expire after a certain amount of time; be sure to discuss this with your lender
information provided via My Home by Freddie Mac