Why do I need to be pre-approved?
By taking the time to go to a lender to get pre-approval you have already become an educated consumer. Lenders can quickly assess your situation and match different loan programs to fit your needs. Most importantly, you will have time to interview several lenders to decide which one is the best fit for you before you get into the purchase offer stage of the process. Many REALTORS will recommend you be pre-approved in order to make sure that you are fully capable of buying the price range of home that you are viewing with the REALTOR. Many people think that they can get pre-approved for a certain price range but never investigate what the monthly payment will be. Remember that just because you can be pre-approved for a $200,000 house, it does not mean that you are going to want to or be able to pay the montly payment once taxes, insurance and PMI are added. A lender can give you a "good faith estimate" which will give you the information you need to decide what price range you should be in by know what the monthly payments will cost you. ALWAYS ask for a good faith estimate! ALWAYS interview at least 3 lenders!
Where Do I Get Preapproved?
I cannot recommend one company over another, but I can give you some places to start your research:
1. Your personal bank. Most likely you have a good repoire with your banking institution and feel comfortable talking to the staff. There should be a loan officer on staff to answer your questions.
2. Local mortgage companies. There are most likely several mortgage loan institutions in your locale. Check the phone book and give some of these folks a call.
3. Credit unions. If you are a member of a credit union, you most certainly should give them a call as well.
There are many online and national companies providing loan services, but do your research before you get involved with a company or organization that you have little information about. Check with The Better Business Bureau to see if there have been any complaints. Remember the advice you've heard all your life, "if it sounds too good to be true, it probably is!" Watch out for predatory lenders!
How do I get preapproved?
No matter who you choose to use for your loan, there is going to be certain information you are going to have to provide in order to see if you qualify for a loan. The lender will let you know exactly what they will need and it most likely will include paystubs, W2's and tax returns for a specified period of time and most likely your social security number. Verify with your lender exactly what they will need. It will require a little work on your part to gather the information, but it is an absolutley necessary step before you start looking for homes.
When do I get preapproved?
As I've already touched upon, you need to be preapproved BEFORE you start looking at homes. You can waste a lot of your time, your real estate agent's time, and seller's time by looking at homes that are way out of your price range. You may think you can afford a certain price range by calculating it on an online mortgage calculator, but you have many other expense to consider such as insurance, taxes, PMI, closing costs, down payments and any furniture or repairs you have in mind. The good faith estimate is fantastic tool when determining potential expenses at closing. Make sure any lender you speak to will give you a good faith estimate. Any institution that will not give you a good faith estimate is in direct violation of the Real Estate Settlement Procedures Act. You do NOT have to have a house picked out in order to get a good faith estimate. Your lender can give you several different good faith estimates. For example, you can get one for $100,000, $90,000 and $80,000 just to see what each price range could cost you. This will help you have a better idea of how much you want to spend on a home.
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