Applying for a Home Loan - It's Easier Than You Think
Knowing how much home you can afford will allow you to refine your home search, which will help you find your dream home that much sooner. Anyone getting serious about buying a home should consider what it is going to take to get approved for a home loan.
We’ve put together this list to help you get the best rate and best payments when you’re ready to get approved for a loan…
- Don’t change job, become self-employed or quit your job
- Don’t buy a car, truck or van (or you may be living in it)!
- Don’t use charge cards excessively or let your accounts fall behind
- Don’t omit debts or liabilities from your loan application
- Don’t buy or finance furniture
- Don’t originate any inquiries into your credit
- Don’t make large deposits without first checking with your loan officer
- Don’t change bank accounts
We wanted to share some tips that will save you time, money and headaches.
TIP #1: Get Prequalified
Before you can seriously consider purchasing a home, it is important to know exactly how much you can afford. You don’t want to miss an opportunity because your financing wasn’t in order!
Prequalified and preapproved are two common terms you hear when it comes to getting a mortgage. But it’s important to know they are very different things.
A prequalification takes 15-30 minutes and involves a few quick questions.
You typically do this before you look for a home.
At this point, the lender takes your word that everything you state is correct and will verify it at a later date.
A credit check is run, and then all the information provided is put through an automated underwriting system, which will provide a preliminary status.
Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:
- Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
- How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it is a good thing if you have a good proportion of balances to total credit limits.
- The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
- How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.
- The types of credit you use. Generally, it is desirable to have more than one type of credit – installment loans, credit cards, and a mortgage, for example.
For more on evaluating and understanding your credit score, visit www.myfico.com
At the end of the process, you will have an idea of how much money you can borrow, and often you will be issued a prequalification letter that states that a credit check has been run and based on the information provided but not yet verified, you qualified for a specific dollar amount.
Real estate agents will often ask for prequalification letters in the same amount of an offer they intend to submit on a property.
Sellers, knowing that a buyer can afford much more than they are asking for a property, will be less likely to negotiate downward or offer concessions.
A preapproval letter is much more involved. It will only be issued after all the paperwork is received by the lender. This includes so much more than income and assets, such as the sales contract, the title to the property and an appraisal, most of which are sought after a contract is submitted and accepted by the sellers.
Lenders issue a conditional commitment letter between the contract date and the closing date. This basically says the lender intends to lend money to the borrower but is verifying information before issuing a full approval.
TIP #2: Always Think Resale
Due to the mobility of our economy, the average length of ownership is about 5 to 7 years.
Aesthetics can be changed such as flooring, light fixtures plumbing, paint colors and wallpaper can all be changed. Do not let the lime green wallpaper turn you off from your potential dream home.
TIP #3: Do NOT WAIT!
Too often, we have seen home buyers fall in love with a property, wait a few days to make a decision because they are nervous and the home that they fell in love with SOLD to another buyer! If you love the home, do not wait for someone else to live in YOUR home – be prepared to write an offer!
Compare Sales to determine the best price to offer, or to know if the asking price is correct, look at the recent sales of similar homes, called “comparable sales”. Let us help you with a Buyer’s Market Analysis.
At Berkshire Hathaway HomeServices Hodrick Realty, no matter what your real estate needs are, we strive to make the process as smooth and stress-free as possible.
Our brand stands among only a few organizations entrusted to use the storied Berkshire Hathaway name representing strength, integrity, trust and universal respect. As important, Berkshire Hathaway HomeServices Hodrick Realty offers you a wealth of real estate tools to help you buy and sell a home.
Once you are ready to take the next step in to sell your home or finding the perfect home, we are here to help and that’s “Good to Know™”!
Founded in 1991, Hodrick Realty is one of the premier full-service real estate firms in north central Pennsylvania. It operates offices in Williamsport, Lock Haven, Lewisburg and Danville, serving the counties of Lycoming, Clinton, Snyder, Sullivan, Union, Northumberland, Montour and Columbia.