Tag: preapproval

Mortgage News Matters

The Importance of Getting Pre-Approved

In the dynamic world of real estate, navigating the homebuying process can be both thrilling and overwhelming. Getting pre-approved for a mortgage is one key factor that can significantly ease the homebuying journey. But what exactly is pre-approval, and why is it considered a crucial step in the homebuying process?

Understanding Purchasing Power

How pre-approval determines affordability: Before diving into the intricacies of the real estate market, understanding how pre-approval shapes your purchasing power is essential. Unlike pre-qualification, which provides a rough estimate, pre-approval involves thoroughly examining your financial health. This detailed assessment clarifies your budget and prevents the disappointment of falling in love with a home that’s beyond your means.

Avoiding disappointment with realistic expectations: Imagine touring homes, envisioning your future in each one, only to discover later that they’re out of your financial reach. Pre-approval helps set realistic expectations, ensuring you focus on properties that align with your budget, saving you time and emotional energy.

Gaining a Competitive Edge

Standing out in a competitive market: Having a pre-approval letter puts you ahead of the competition as it signals to sellers that you are a serious and prepared buyer, increasing your chances of having your offer accepted.

Sellers’ perspective on pre-approved buyers: From a seller’s standpoint, dealing with a pre-approved buyer is appealing. It reduces uncertainty and assures them that the deal is more likely to close smoothly. This added confidence can be a game-changer in a seller’s decision-making process.

Streamlining the Homebuying Process

Accelerating the mortgage application process: Pre-approval helps streamline the application process. With the initial paperwork completed, the formal application can progress faster, allowing you to move more quickly when you find the perfect home.

Identifying potential hurdles early on: The pre-approval process also helps identify any potential hurdles in securing a mortgage. It’s an opportunity to address credit issues or financial concerns before they become obstacles in the homebuying journey.

Negotiation Power

Leveraging pre-approval in negotiations: When negotiating the terms of a home purchase, pre-approval provides leverage. Sellers are more likely to negotiate with someone who has secured financing, as it reduces the risk of the deal falling through due to financial issues.

Demonstrating seriousness to sellers: Beyond negotiation, pre-approval demonstrates your commitment and seriousness as a buyer. It assures sellers that you have taken the necessary steps to secure financing and are ready to move forward.

Building Confidence and Peace of Mind

Confidence in making an offer: Pre-approval instills confidence in making an offer. Knowing you have financial backing enhances your decision-making process, allowing you to make competitive offers without hesitation.

Reducing stress during the homebuying journey: The homebuying journey can be stressful, but pre-approval can minimize uncertainty, reduce stress, and let you focus on finding the right home for your needs.

The Pre-Approval Process

Steps involved in obtaining pre-approval: The pre-approval process involves several steps. It typically starts with a mortgage application, followed by a thorough examination of your financial documents, credit history, and employment verification.

Documents required for pre-approval: To get pre-approved, you’ll need to provide documents such as proof of income, tax returns, employment verification, and information about your assets and debts.

Common Misconceptions

Clarifying misconceptions about pre-approval: Despite its benefits, there are common misconceptions about pre-approval. Some believe it commits them to a specific mortgage, while others think it’s only necessary for first-time homebuyers. Clearing up these misconceptions is crucial for making informed decisions.

Tips for a Smooth Pre-Approval Process

Organizing financial documents: To ensure a smooth pre-approval process, organize your financial documents in advance. This includes recent pay stubs, tax returns, bank statements, and any other relevant financial information.

Maintaining good credit during the process: Maintaining good credit is crucial during the pre-approval process. Avoid major financial changes, such as opening new credit accounts, to ensure your credit score remains favorable.

Pre-Approval vs. Pre-Qualification

Understanding the difference: While often used interchangeably, pre-approval and pre-qualification differ significantly. Pre-qualification is a preliminary estimate of your borrowing capacity, while pre-approval involves a comprehensive financial assessment.

Mortgage News Matters

How to Get Your Contract Accepted: Tips on Making Your Offer

Making an offer is a thoughtful process that should be done with great care and consideration. To help, we’ve shared 8 helpful tips for getting your contract accepted.

  1. Get pre-approved. Getting preapproved by a lender before making an offer tells you how much buying power you truly have and helps pre-determine your bottom line.
  2. Offer earnest money. Earnest money is a deposit made from the buyer to the seller once the offer has been accepted and is typically kept in an escrow account. This ‘good-faith deposit’ shows the buyer’s commitment in selling the home and can be kept as cash or later applied towards the purchase of the home.
  3. Shorten inspection, or due diligence period. The due diligence period is the time between signing the contract and inspection of the property. During this time, the buyer still has the option to walk away from the sale. Shortening this period separates the serious buyers from those who are not so sure.
  4. Reduce or eliminate certain contingencies, such as inspections or move-in dates. This reduces common time-consuming obstacles to the home buying process.
  5. Include an escalation clause. Ideal for a multiple offer situation, an escalation clause states that your bid will automatically raise, if another buyer bids higher than you. This allows buyers to continually remain on top of the competition.
  6. Submit an offer letter. A personal note expressing an emotional connection to the home shows the seller that you are not just any other buyer – you genuinely care and would take great pride in owning their home. This also helps to provide buyers with a competitive edge.
  7. Make a clean offer. A clean offer is a simple offer. Meaning, it is easier to close. Clean offers refer to those that have short financing and appraisal contingencies, and a shortened due diligence period. Clean offers are essential when buyers find themselves in a competitive seller’s market.
  8. Present a strong (or best) offer price. If it is in your budget to do so, consider offering more than the asking price. This will set you apart from other buyers and provide you a competitive edge.

To learn more about making an offer and tips to getting your contract accepted, contact your local VanDyk Mortgage Loan Originator today!

Mortgage News Matters

What Does a Lender Look for When Approving My Loan?

When beginning the pre-approval process, most lenders are looking for a few major things: Credit History, Capital, Employment, and Collateral.

  1. Credit & Credit History. Lenders will use your current credit and past credit history as an indicator of your ability to repay your debt. They will look at how much you currently owe, how often you borrow, how often you pay your bills – and if you often pay them on time, as well as how well you live within your means. To check your credit score, visit annualcreditreport.com.

  2. Capital. Capital tells the lender how much money you have, to put towards your down payment, as well as funds that will remain in your accounts after closing to be used for reserves. This includes such things as moving expenses, money required to turn on utilities, emergency repairs, or cost of ongoing maintenance. This is crucial information as you begin your home buying journey and apply for a loan.

  3. Employment. Employment tells the lender approximately how long it will take you to pay back your debt. They will check things like your previous employment history, as well as your current employment situation. Lenders are looking for stability in your income earnings trend to help determine its likelihood of continuance.

  4. Collateral. Collateral protects the lenders in the case that borrowers are unable to repay their loan. This is equally important to lenders as credit, income, and employment, as it acts as a safety net in the unfortunate circumstance that the loan is unable to be paid.

For more information on the Loan Application and Loan Process, contact your local VanDyk Loan Originator today!

Mortgage News Matters

What is the Difference Between Pre-Qualification and Pre-Approval?

Many home buyers know that pre-qualification and pre-approval are necessary steps in the home buying process, but not many understand how they differ, or when each action is required.

To help, we’ve broken down the process of each, and what – you as a home buyer – will need to provide.

What is pre-qualification?

Pre-qualification is an essential first step in the homebuying process. It tells you how much money you can borrow, based on your current finances and credit score, and gives you insight into your mortgage options, allowing your lender to better identify your unique needs and goals.

What do you need to provide for pre-qualification?

  • Income information
  • Credit check
  • Information about bank accounts
  • Down payment amount and desired mortgage amount

What is pre-approval?

Pre-approval is a much more in-depth process that requires more information and likewise carries more weight. This process requires you to complete a mortgage application and requires your lender to perform a credit check. Keep in mind that this process requires a detailed examination of your finances, so be prepared to answer unexpected questions.

The benefit of getting pre-approved is that it shows your seriousness as a homebuyer and your ability to secure a mortgage. Once you receive your pre-approval letter, it is valid for 90 days.

What do you need to provide for pre-approval?

  • Copy of pay stubs showing your income for the previous 30 days
  • Credit check
  • Bank account information or two of your most recent bank statements
  • Down payment amount and desired mortgage amount
  • W-2 statements
  • Personal and business tax returns from the past 2 years

Are you looking to get pre-qualified or pre-approved for a mortgage loan? Contact a VanDyk Loan Originator by calling 888-482-6395 today!