First Step When Buying a Home
Why Getting a Loan Pre-Approval is the First Step in the Home Buying Process.
In many markets across the country, in most of suburban Chicago communities, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This leads to a more competitive marketplace than years ago.
Without question, the first step a home buyer should take is to get pre-qualified or pre-approved for a mortgage if taking out a loan. This is a written, current letter from the bank. If cash, an up-to-date proof of funds letter is provided.
These letters are provided to the sell side when you write an offer – at time of submitting the offer. In the majority of communities here, waiting on a letter before submitting an offer can mean it’s too late. The home will probably under contract.
Furthermore, buyers don’t know what they can truly afford (and loan terms) before looking at homes.
Even if you are in a market that is not as competitive, where inventory may be plentiful, knowing your budget will give you the confidence of knowing if your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford. It can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you fill out their loan application and provide important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
- Capacity: Your current and future ability to make your payments
- Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. There are great mortgage lenders we know that clients have enjoyed working with. Thinking of buying? Call (708) 529-JUDY today or send a message via the contact us page.