What is the first step I should take to purchase a home?
This is a question that comes up often from buyers and it is an important first step and worth writing about.
Your first step should always be to secure a lender if you are planning on getting a loan. In most cases you have no idea what price of a home you qualify for or what you are comfortable buying based on what the payment would be. This is the information only a lender can provide you.
Benefits to you: Knowing exactly what you can afford and what you are comfortable spending based on the payments..
Benefits to your Realtor: They can then help to narrow your home search based on the homes you could buy and would be most interested in.
Once you have picked a lender, (our next blog will be on the difference between types of lenders) the lender will provide you with a letter stating that you have been pre-qualified or pre-approved for a certain amount so both you and your agent know what to look for.
The next question people always ask is “what is the difference between being pre-qualified and pre-approved?” There is a big difference for both you and the seller of the home you intend to buy.
Pre-qualified usually means you have called a lender and told them verbally a little about yourself, how much you earn, how long you have been on your job, etc.
Pre-approval means the lender has taken the time to ask for specific documents like pay stubs, tax records, run a credit report, etc.
It used to be that just being pre-qualified was good enough to submit an offer on a property, but due to several issues with pre-qualifications it has now become much more important to have a pre-approval (Desktop Underwriting).
A pre-approval will benefit you in several ways:
1. It will take you through getting about 90% of the way to a full formal loan approval.
2. Less chances of unsuspected surprises coming up after you have your heart set on a home. (Fraud on your credit report, an incorrect amount showing on your credit report, questions around your tax returns, employment dates, etc.)
3. Stronger offer as the seller will know that your lender has taken the time to make sure you are a qualified buyer.
It may take more time up front to get pre-approved but it is well worth it when it comes time to make that offer. Your agent has to submit a copy of a pre-qualification or pre-approval at the same time with your offer and the pre-approval will carry more weight with the seller and there agent.
For information about our preferred lenders call us:
Steve (916) 425-1100 or Sandy (916) 544-2066
Stay tuned for our next blog (Wednesday) about different types of lenders