Buyers are in such a hurry to get in the car and look at houses that they forget about the first and second steps many times. In my opinion the very first step is interviewing a few agents, there will be more about this later. Once you have found a great agent to help with your home purchase then you need to find out how much home you can actually afford.
The Pre-Approval process is simple and painless these days. The most important part of this process is to work with a reputable local lender. The large internet lenders claim to be this and that, but the reality is they have fallen far short of the needs of home buyers. Worse Illinois has many regualtions that out of state lenders never know about and this causes delays in closings or worse. So now the question becomes what local loan person should you work with?
Who to use?
- I strongly believe that home buyers will get better service and many times lower fees and/or rates when they work with the loan officer that is referred by the real estate agent. The reason is that the loan officer isn’t only trying to make you happy, but also keep their relationship with the real estate agent. The loan officer can’t give the agent money for sending business, so they have to make sure to do an amazing job for each and every one of the agents clients.
Why bother with a pre-approval?
- The simple answer is most sellers will require it.
- More important is so you don’t waste your time.
- On the emotional side, so you don’t find a house fall in love with it to then find out that you can’t afford the home
- One the practical side, would you want to accept a contract on your home if the buyer wasn’t pre-approved?
When?
- When you have decided what agent you want to work with you should then call the mortgage person they referred and get the process started. You should know how much you can afford before walking into a single home. Again why chance seeing something that you fall in love with only to find out that you can’t afford it.
3 responses so far ↓
Karen Geselle || Apr 5, 2008 at 5:27 pm
I agree with your assessment about working with the loan officer referred by the buyer’s Realtor. Realtors can not receive any renumeration for referring a buyer to a lender but the lender will generally provide better service to the buyer because of the relationship they have with the Realtor. A couple of other items:
Make sure it’s a “Pre-approval” and not a “Pre-qualification”. The “Pre-approval” requires the lender to pull and review the buyer’s credit report.
One more item that is important in the pre-approval process - the Good Faith Estimate. The Good Faith Estimate provides not only the monthly payment the buyer will have to pay but also the closing costs that will be incurred at closing. Once the lender figures the maximum dollar amount the buyer can qualify for, the lender can provide a Good Faith Estimate to the buyer on that amount. Then the buyer can compare closing costs charged by the different lenders to determine who can provide the best overall mortgage product. Then when you find that house you fall in love with, you know what lender you’ll be moving forward with.
Edward Balcsik || Apr 10, 2008 at 1:28 pm
Pre-Approval is definite first or second step for a buyer.
It is true:
Pre-Approval allows you to detemine the price range of properties you can afford.
Pre-Approval is essential for making your offer look serious and hence being taken seriously by sellers.
Pre-Approval allows you to effectively use the Good Faith Estimate to compare loan cost. A Good Faith Estimate also allows you to ask yourself what you want to afford. Part of the Good Faith Estimate is an estimated monthl payment. While it is essential the lender believes you can make the payment. You also need to ask yourself if its a monthly payment you can live with. Just because you can qualify and receive a loan of X dollars with Y payments does not mean you should commit yourself. Before you make an offer or set price range for looking, ask yourself what monthly payment you are comfortable with. You are the one who will have to make the monthly payment
Susan Zanzonico || Apr 26, 2008 at 7:27 pm
This is excellent. Karen, good point about the pre-approval vs the pre-qual. I am of the belief that if the buyers are serious, they won’t have a problem getting a pre-approval or at least starting the process early on. When they resist, it makes me think they aren’t really serious. In NJ our contract offers must be accompanied by a pre-approval or they aren’t taken seriously.
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