Part 2: Getting Loan Pre-Approval
After planning out exactly what they want in a home, most future home buyers think the next step is to go out and start looking for the perfect home. Unfortunately, this is not the most ideal second step in the home buying process. Why not? Reason being, very few people pay cash for a home and if you are one of the 9 out of 10 who choose to finance a home, you have yet to set your budget. Without getting pre-approved for a mortgage, home buyers could potentially fall in love with a home that they may not be able to finance.
Therefore, the next step we recommend in our Ten Steps to Home Ownership Series is to talk with a lender and get pre-approved for a mortgage loan. Pre-approval guarantees you a set loan amount that can be borrowed which will provide you the information needed to set a budget for your future home.
The hardest part about financing a home is finding a loan program that works for you. Oklahoma Mortgage Bank understands that potential home owners are looking for financing options that provide mortgages with the lowest costs and absolute best terms. Therefore, we suggest meeting with a lender and looking at loan programs as the second step towards home ownership so you will discover the loan option that works best for you and the total amount you can afford to spend on a home. One other reason our team of mortgage experts suggest getting pre-approved for a mortgage is the fact that purchase forms often require potential home buyers to apply for home financing within a given time period, usually only 7-10 days. Given such a short amount of time can lead to a rushed decision about a loan program that may end up not being your best option. If you meet with a lender before hand, you will have ample time to check your credit and choose the loan program that best suits your needs.
What does it mean to get “pre-approved” for a home loan?
When a potential home buyer has been pre-approved by a lending company, that borrower has actually met with a loan officer, their credit files have been pulled and reviewed, and the loan officer believes that the potential home buyer is eligible for a specified loan amount through one or more mortgage programs. When you are pre-approved for a home loan, the loan officer is agreeing to lend you the quoted amount. Once the process is completed, the lender will provide the qualified borrower with a pre-approval letter. This letter shows your borrowing power and can be very appealing to sellers when you begin looking at actual homes. Although this is not a final loan commitment, it does demonstrate your financial strength and proves to the seller that you have the finances necessary to go through with the purchase. If there are several offers on a home, having a pre-approval letter could give you the upper hand. It tells the seller that you are serious about buying and lets them know that your offer is not likely to fall through because the adequate amount of financing could not be obtained.
How can I get pre-approved for a mortgage?
Start by finding a mortgage lender you are comfortable with. You want a lender that has your best interest at heart. A good lender will work with you to find a loan program that best suits your needs and explain every step of the home buying process to make sure you fully understand the process. Once you have a lender selected, they will assess your current financial situation. This is where a credit report will be obtained and your income, debts and assets will be reviewed. Lastly, the lender will suggest loan programs that they believe will best suit your needs. Once a loan amount is agreed upon, the lender will provide you with a pre-approval letter to use in the future steps of the home buying process.