You may be surprised to hear that the first, and one of the most important, steps in the home buying process has nothing to do with finding a home. Before you start touring houses, talk to a lender to get pre-approved and make sure your finances are in order. Here are a few important reasons to get pre-approved:
- You’ll know your budget so you don’t fall in love with a house outside your price-range
- You’ll be ready to make an offer fast so you don’t lose out on a home
- Many sellers require a pre-approval letter when you put in an offer
- You can determine how much cash you need on hand for a down payment, closing costs and other expenses
Q: What do I need to get pre-approved for a mortgage?
A: Your lender will have you complete a loan application and provide verification on your assets, income, credit, employment and other important documentation. Pre-approval is based on your credit score, debt-to-income ratio, and other factors, depending on the type of loan.
Q: How much money do I need to save for closing costs and a down payment?
A: Closing costs are typically 3-6% of your loan amount. A downpayment of 20% is ideal, but most lenders don’t require the full amount and can help you find down payment assistance if needed.
Q: I can’t get pre-approved for my dream home. Should I keep renting instead of buying?
A: Holding out for your dream home isn’t always the best financial decision. If you buy a house you can afford now, you can save – and grow – money over time. Then when you’re ready, you can use the equity you’ve built to help fund your next home.
HAVE MORE QUESTIONS?
Give us a call. We can connect you with a trusted lending partner who can help you better understand your finances. Then when you’re ready to start your home buying journey, we’ll be here to guide you every step of the way!