STEP 3: GET A LOAN PRE APPROVAL 

As we all know, most people can't purchase a home for cash. In 1999,

nine out of ten buyers, especially first time buyers, financed their

homes requiring a loan. (according to the National Association of

Realtors). 

The most difficult part with real estate financing is not getting the

loan but getting the mortgage with the terms that are best for you.

This also means the best interest rates so you aren't forced into

paying sky high rates. It is a good idea to start the mortgage process

before bidding on a home. Your real estate agent is a good person to

ask for suggestions in finding a good lender. When meeting with your

loan officer you will be able to decipher which loan is best for you

and decide exactly how much you can afford. Pre approvals are

recommended because approval forms often require buyers to apply for

financing within a certain amount of time which is generally seven to

ten days. Meeting with your lenders ahead of time can save you from

possibly having to rush into a financing decision that may not be the

best one for you. 

What is it? 

"Pre approval" means: You have met with your loan officer, your credit

has been properly reviewed and you qualify for a specific amount

involving one or more mortgage programs. The lender takes all of this

information and produces a pre approval letter; this is not a final

loan commitment. You can apply with as many lenders as you'd like but

keep in mind with each one is a new credit check which shows up on

future credit reports. The pre approval letter shows your financial

strengths and proves you can go through with the purchase so this

letter can be shown to listing brokers when bidding on a home. 

How Do You Get Approval? 

Your real estate agent or realtor will be able to suggest one or more

lenders that they know offer competitive programs with guaranteed rates

and terms. Many lenders and mortgage companies offer financing for real

estate and can suggest programs that meet your needs once they have

seen your credit report and collected other information. One program

might be for first time buyers which is a state-backed program with

little or no money down and low interest rates. Generally, a first time

buyer prefers a 30-year loan with a fixed rate of interest over the

life of the loan or a floating interest rate. 

Be Careful When Pre-Qualifying Online 

 Qualifying for on-line loans are quick and easy but remember too many

inquiries can hurt your credit score! Every time you apply for a loan

or credit card the lender checks your credit history and your credit

report will record another "inquiry" that will show up on your credit

report. Many inquiries on a borrower's report indicate that the

borrower will not be able to pay his/her bills. 

Don't Forget Your Pre-Approval Letter 

Here Are 5 Reasons Why Getting a Pre-Approval Letter is a Good Idea 

A pre-approval letter is reliable. Getting a pre-qualification letter

from a mortgage broker or lender is easy and getting a "pre-qual" from

a Web is just as easy. Just type in some information.submit.and there

you have it! However, a pre-qualification letter is a little bit more

detailed in the way that you need documentation to support your

information. This is a lot more tedious and probably even stressful and

this is exactly why the pre-approval letter carries more weight. 

This will give you a better idea of how much money you can qualify to

borrow. Home buyers usually know how much they can afford to spend on

the mortgage. But there is no way of figuring out a specific amount

because of other factors such as property taxes, adjustable interest

rates, down payment percentage, and insurance, etc. as being part of

the calculation. And more than likely you are not qualified to borrow

as much as you thought (depending on debts, credit, and income). 

With pre-approved buyers, sellers know they are financially qualified

so they are more apt to negotiate because the seller has the financing

needed to close the deal. A pre-approval letter is especially

beneficial in a close multiple offer situation. 

A pre-approved letter indicates to a real estate agent that you are

qualified buyer who is serious about buying a new home and she/he will

work harder on your behalf. Considering the chances of closing a

sale/commission are pretty high, your agent will more than likely be

motivated. Some agents won't show property without a pre-approved

letter. 

Keep in mind, however, a pre-approval is not binding on the lender.

Many factors could change (interest rates rise, you lose a job, extend

your credit card bills) and the lender may want to review your

situation and recalculate your mortgage amount.