Once you’ve found a Realtor to represent you, step 2 to buying a home is to get pre-approved by a mortgage lender. “Shopping for a home before getting pre-approved for a mortgage is the equivalent of walking into a grocery store without a wallet.”
Most Realtors won’t show you homes until you are pre-approved with a mortgage lender. An Agent who does and then makes an offer to a seller without the buyer’s pre-approval in hand, is sure to have the offer rejected. Everyone involved loses time and money. If you’re serious about finding your new home, be sure to get pre-approved BEFORE shopping for one.
Further, it’s important that you have an understanding of where you stand financially. Getting pre-approved will show you how much you can comfortably afford to spend on a home, what your monthly payments will be, what interest rate you qualify for, and how much you’ll be paying each month in taxes, etc. The pre-approval process will help you determine a price range to search for homes.
Having a good mortgage lender is a crucial part of ensuring a smooth transaction and getting the home you want. I’m happy to provide you a list of several lenders to contact if you are not already working with one. Just call me at 614-208-9794 or email email@example.com.
Paperwork You Need To Gather
Each lender requires basic documentation from you for the pre-approval process, which typically includes:
- Pay stubs
- Last two years’ W-2s
- Last two years’ federal tax returns
- Two months’ worth of bank statements for all accounts
- Your credit report
Getting a Pre-Approval Letter
Once you submit the above items to your lender you should receive a pre-approval letter within a 1-2 business days. If needed, they may ask for additional documentation from you. At this point, the lender can give you a good idea of what the monthly payment amount, including taxes and insurance, will be based on the amount of the pre-approval amount. Here’s a tip: just because you’re approved for $300,000 does not mean you have to purchase a home for $300,000. Be sure to look for a home that is within a price range comfortable for you. Let your lender know if you want to stay at a certain monthly payment. They’ll be able to help you determine a price range for you to consider when shopping for homes. Once you’ve received your pre-approval letter, be sure to send it to us so we have it on file when you’re ready to submit an offer.
Get a Loan Estimate and Understand Your Closing Costs
Mortgage lenders are required to provide you with a Loan Estimate (LE) or Good Faith Estimate within 3 days of receiving your pre-approval. The LE provides an estimate of the closing costs you’ll need on top of your down payment and shows exactly what fees the mortgage lender is charging you. Make sure you understand these fees. Generally, buyer closing costs range between 2% – 4% of the purchase price of the property.
Both buy and seller will have their own closing costs which are due at the time of closing. Don’t worry…the closing costs for a buyer can generally be included in the loan. However, let your lender know if you prefer to pay them outside of the loan. In addition to the closing costs, you will have upfront fees for the appraisal and inspections. Your down payment is separate and those funds get wired from your bank to the title company a few days before closing. Your lender can explain the loan estimate and time-frames to you.
Should You Shop Your Loan Around?
Absolutely. Every lender charges different fees and different interest rates. You’ll want to talk to a couple different lenders to make sure you’re comfortable with them and the loan they suggest for you. You may want to wait 2-3 weeks between meeting with each lender so it doesn’t affect your credit. If you wait a few weeks between having your credit pulled it generally won’t affect your credit at all.
Have questions? Call 614-208-9794 or email firstname.lastname@example.org. I’ll help you buy sell love Columbus.