Many people begin their home search by thinking about where they want to live, what type of house they want, how many bedrooms and bathrooms, etc. Then they begin to look at homes, either online or in person. However, if they have not taken the time to consider the financial implications and determine how much they can actually afford, they have overlooked an important step in the process.
All too frequently, I will receive a call from a potential homebuyer telling me they have found their dream home and now they want to be pre-approved so they can submit their offer. There is nothing more disappointing than going through all that effort, thinking you have found the perfect home and then finding out it is beyond your reach!
When should you get pre-approved?
Timing your mortgage pre-approval may depend upon your financial situation.
If you know that you have credit issues, such as previous short sales, foreclosures, or bankruptcies, it is best to begin the process as early as possible. Underwriting guidelines continue to change regarding waiting periods required after experiencing one of these events and you definitely will want to know whether sufficient time has passed before you begin your home search. (See our related blog on FNMA guideline changes.)
If you have not looked at your credit in a while, you should obtain a credit report before you begin looking for a home. Even if you think your credit is good, I have seen many instances where the borrower had no idea about some of the derogatory information being reported on their credit.
If there are errors on your credit report you will need time to make corrections before buying your home. If you have previously disputed items on your credit, those “disputes” often remain on the credit report for a long time, even after the dispute has been resolved. Many loan programs will require that the credit report does not contain disputed items. This is another instance where you will need time to make these corrections. Sometimes removing disputed items can change credit scores, so you will not know your true score until corrections are made. By getting pre-approved early, the lender will run your credit, and most likely will be able to assist you with expediting any corrections needed.
Many people simply procrastinate the pre-approval process either because they feel they are not ready for it or it will require too much time. And let’s be honest – it’s a lot more fun to go out and look at homes than digging through your tax returns, pay stubs and bank statements to provide accurate information to the lender. For working couples, taking the time off work to go sit with a lender may not be possible.
At Marimark Mortgage, we strive to make this process as stress free as possible. We go through the loan application over the phone with borrowers and obtain their documents electronically. After hours evening and weekend appointments are also available. Within less than 1 hour, you will have your pre-approval and a letter will be sent directly to your real estate agent.
Having a pre-approval letter ready when you go out to look at homes in most cases will be required by your real estate agent. However, more importantly it shows the seller you are ready, willing and able to purchase.
It’s Never Too Early
I recently worked with a borrower who first came to me almost four years earlier! They knew they had some credit issues and wanted to plan accordingly. As a result of patience and planning, they were in a position to get the best rates possible as they worked on their credit, saved for a 20 percent down payment, maintained consistent steady employment and income, and knew that they were ready.
So, I believe it’s never too early to be pre-approved for a mortgage!