Last Updated on March 27, 2021 by Kathy Rukat Smith
This post is a continuation of a series, Overview of the Home Buying Process. You may also want to read my first post in the series about finding a real estate agent. Today, I will be talking about getting pre-approved for a loan.
Getting pre-approved for a loan is a very important step in the home buying process, and it should be completed PRIOR to looking for homes. Why is getting pre-approved for a loan important to you?
- You will know how much home you can afford.
- When you find a home you like, you will be prepared to present an offer. Most sellers want to see a pre-approval letter with offers.
- Your offer is strengthened by a pre-approval letter. That letter says to the seller “I’m ready and qualified to buy your home.”
How do you go about finding a lender? Talk to your real estate agent. Your agent works with a lot of lenders, and they know which lenders are good at their job. You want to make sure you have a lender that is informative about the different loan programs available to you. You also want a lender that is honest since they will be handling your financial information, and you want a responsive lender. Many terms in a home purchase contract are time sensitive. You want you lender to be mindful of those deadlines. You can do a few things prior to talking to a lender that will make getting pre-approval for a loan a lot smoother process.
- Start saving for your down payment and pay your bills on-time.
- When you go to talk to a lender about getting pre-approved for a loan, know your basic financial information. For example, know where you will be getting your down payment. Have you been saving for the down payment, will you be getting a gift from a family member or do you need a loan with no down payment? All of these situations require different types of loans.
- Know where you will be getting the money for your closing costs. Those funds could come through savings or you can ask the seller to pay for closing costs.
- Let your lender know how much you would like to spend. You do not necessarily need to know that you want to buy a $150,000 home. Instead, let the lender know what you pay each month in rent and if you would like to spend the same amount. Your lender will determine the amount of home you can afford.
When you meet with your lender, you will receive a loan application. Complete that application thoroughly and completely. Typically, your lender will need to know the following information…
- your name
- date of birth
- social security number
- income source (job, retirement, etc.)
- down payment amount (if any)
Questions You Should Ask Your Lender – Getting Pre-Approved for a Loan
- What is the closing time frame with my chosen loan?
- How much are the fees associated with my loan and who gets those fees?
- What is an estimate of the amount due at closing (i.e. closing costs)?
Once you get the application back to your lender, it will take an hour or two for your information to be reviewed and a pre-approval letter written. There is no cost involved in talking with a lender and getting pre-approved for a loan. You will have a professional review your financial information and credit score, give you advice and an estimate of what you can afford, and have confidence to submit an offer on your dream home.
Your lender will also ask you which real estate agent you are using so they can forward your pre-approval letter to that agent. After getting pre-approved for a loan, the next thing you need to do is meet with your real estate agent and go through a buyer consultation. In my next blog post, I will talk in more detail about the buyer consultation. Until then, you can contact me with any home buying (or home selling) questions. I can be reached by email at Kathy@KathyRukat.com or by phone/text at 843-267-2710. Start searching for your next dream home by visiting the Basic Search section of my website. Happy house hunting!!!
“Helping You Find the Sandcastle of Your Dreams!”