The first step in any home purchase is determining where you stand for financing. When heading out with a realtor to find your new home, it makes sense to know that you are "shopping with your wallet". This is true whether you are buying your first home or your fifth home. With an unusually hot market and increasing mortgage rates, it is more important than ever to be a prepared buyer.

Pre-approvals or pre-qualifications can be described by different names, and the process can look very different depending on where you go to get one. So how do you know your financing is sorted and you are ready to go shopping? In my opinion, there are three key parts to a pre-approval. If you are missing one or more of these, then it is time to look for a new mortgage lender.

Rate Hold

You can hold an interest rate for 120 days, or 4 months, while you are out shopping for a home. Fixed mortgage rates are low right now, but rates have started to increase in the last 3 weeks from historic lows over the winter. If rates continue to increase, it can save you a lot of money to secure a rate while you are searching for your home.

Max Purchase - Qualifying Amount

The pre-approval process should give you a good understanding of your maximum purchase amount so you are shopping in the right budget range and property type. You want to use a mortgage professional who reviews your supporting documents up-front, when determining your maximum purchase amount. These documents may include tax and employment paperwork, proof of down payment, and documents related to other properties you own. This document review is a key step that not all lenders complete. If they rely only on the numbers you provide to them, then you can find yourself being declined later when you write an offer on a home and something in your documents changes your ability to be approved. Without providing supporting documents, the numbers you are given may not be accurate.

There are also assumptions built into any max purchase calculation, such as property tax amount, condo fee amount, etc. You want to understand what those are.

Education

Going through a pre-approval is more than just being given a max purchase number. It is your opportunity to learn about your mortgage options, how the maximum purchase was calculated, closing costs, next steps in the buying process, and other considerations for your situation. Once you write an offer you will be working with a deadline, so the more information and questions you can sort out prior to your purchase, the smoother your experience will be.

And if you are not able to be pre-approved, you should understand what your barriers are and the steps you will need to take to be able to change that.

If you are planning to purchase a home, or know someone who is, contact me now to complete a pre-approval process and secure a rate!