Can you think of anything more unhinging and exciting than buying your first home? Those of us who have been thru the process tend to forget with time how huge it is. But the process can be overwhelming if not exposed to the entire picture and then taking it one step at a time.
That’s the role of a good realtor.
So let’s take a look at the first step of the process…
Pre-Qualification/Pre-Approval Letter — Before anything, you want to get Pre-Approved. Only a short while ago getting Pre-Qualified was all that was necessary. But in today’s real estate market — you really need to get a Pre-Approval letter. With the new and more strict lending rules — Sellers and banks are looking much harder to see if a buyer can qualify to buy their house. They want the information up front. So many sellers now require a Pre-Approval to accompany an offer. On Foreclosed properties, you have no choice — you must provide the letter with the offer.
It’s not that difficult — here are the steps…
1. Get the name of a lender from your friends, co-workers or real estate agent. It can be someone in the Loan Department of a bank or a Mortgage Broker. (I know several that I can refer you too).
2.Meet with them to get Pre-Approved. A pre-approval letter involves verification of financial and credit information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment, your credit and other aspects of your financial circumstances. NONE OF THIS IS SHARED IN THE LETTER.
3. Get the Pre-Approval letter. After the loan person crunches all the numbers — you’ll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there’s no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors — down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on — are part of the calculation. And, you might not be qualified to borrow as much as you think you should be able to borrow, depending on your income, your debts and your credit history. The lender will give you a letter stating that you are Pre-Approved for a certain dollar amount.
Now you know what price range you can look at! No disappointments. A clear and focused journey.
4. You’ll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in a close multiple offer situation. Foreclosed properties require one. And, you might feel more confident about making an offer with a pre-approval letter in hand and the knowledge that you’ll be able to obtain a mortgage.
5. Your real estate agent will work harder on your behalf. A simple fact of life — A pre-approval letter signals to your real estate agent that you’re a well-qualified buyer who is serious about purchasing a home. The increased likelihood of a closed sale — and a commission — will naturally motivate your agent to devote more time and energy to you.
I have learned the hard way — for myself and for my buyers — not to start showing property without first having the buyer obtain a Pre-Approval letter. I have spent countless hours showing homes to a buyer only to find out the were not qualified to buy a house. And buyers have had their hearts broken putting in an offer on a home only to find out there was no way they could afford it. So to save both the Buyers and myself time, money and disappointment — I require any buyer who wants to work with me to get Pre-Approved.
5. A few caveats: Pre-approval letters aren’t binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, lease a car or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.
JeffPalmerRealtor's Blog 
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