The home buying process is fraught with challenges which can lead to victory or frustration. I know I have said this before, but one piece of the process will help eliminate some of the frustration—a pre-approval letter will establish your buying power.
You’ve contacted a couple of lenders to make sure you’re getting the best rate for your mortgage. Smart! With the competition among lenders a buyer has more power to get a mortgage that’s attractive and at historic low rates. With that in mind it’s time to check out what’s on the market in your price category.
Now that you are pre-approved and know your purcha$e power it’s time to start shopping. You decide on neighborhoods, features, and style of the home that might work well for you; essentially, creating a wish list. At last you find the right property at a price that makes sense to you and your lender says ok.
You’ve made an offer. It gets accepted and you perform your due diligence. Any home purchase involving a lender will have a loan contingency—sometimes 10 days to three weeks. This is coupled with a property appraisal that will establish the value, hopefully at the price of your offer.
After necessary inspections and documentation you await the loan contingency period. That is when the lender reviews the appraisal, title, purchase contract and other miscellaneous documentation that supports your purchase price.
While you spent time looking at properties you decided to apply for a credit card, enroll in school or even buy a new car. Not so smart. Just before the lender is about to remove the loan contingency they revealed that they are not moving forward with your mortgage. You protest that you have been pre-approved and how could this happen?
What they didn’t tell you—which I tell all of my buyer clients!—don’t try to get any additional credit while awaiting your loan approval. This is viewed as additional debt encumbrance, committing more of your finances to something other than the home purchase.
The moral of the story: when you work with me you’ll get a complete education before you even start the shopping process. It’s so very important to know before you go.