Monday, October 7, 2013

Pre-Qualification

Whether it’s your first or fifth property, everyone really should get pre-qualified. The primary reason to get pre-qualified is because one wants to know how much of a home they can buy. Though the reason(s) one buys a home can be multiplicative or singular in nature, the process in route is pretty standard. Talk to me if you need help in going through the steps. Below I want to elaborate on a few insights around this process:
                                                                                                          
1.      Getting pre-approved & pre-qualified are not the same thing! Getting pre-qualified determines that one is likely to qualify for credit, while the pre-approval implies that a credit decision has been rendered.
2.      The appeal of a bid made on property in many cases does go up when the letter from a lender is ready to go. However, in many cases it will not offer an advantage because it is required.
3.      Debt-to-income ratios are what it’s all about: financial institutions want to know where you were so they can understand where you will be. The bank is actually building your balance sheet for you! You are allowed to ask for your personalized report.
4.      The pre-approval is not ironclad. It does not guarantee that you will get a loan. {A banker joke: keep them on hold until you get income projections, and when you get the projections just ignore them.}
5.      Historically speaking: the mortgage-lending business arose in the 90’s on the value proposition that “real estate agents should spend more time with clients and less with the banks…” Call it right or wrong, but the fact is that there is another layer in the process. An agent’s responsibility is to aid in the financing process however possible.
6.      It is ultimately a loan officer, and not a mortgage underwriter that approves your loan. Depending on the institution one can feasibly influence approval through qualitative arguments.
7.      Student-loans are a very important consideration. Recall the importance of debt-to-income before and after the home purchase.

If you are only interested in the how questions, please come and speak with me so that I can walk you through the process. Here I have given a few of the why explanations surrounding the process.

Until next time.