It’s awesome to dream about owning a new home. But when it comes time to getting a Realtor and making appointments to view prospective properties, it’s serious work.
When seeking to buy a home, the first thing you need to do is determine if you can get a mortgage.
There’s no reason to look at properties until you’re pre-qualified for a loan to pay for a home. So, many Realtors won’t show you properties unless you’re pre-qualified for a mortgage.
Credit Score and Saving to Pay Expenses
Lenders will look at your credit score when approving you for a loan. Whether you are applying for a credit card, home mortgage, or a different type of loan, the lender will pull your credit.
In general, the higher your credit score, the better interest rate you’ll get on the loan. But if your credit score is below a lender’s minimum standards, you will not qualify and therefore be rejected.
So, one of the first things you want to do when thinking about buying a home is getting your credit in order, and saving for the expenses associated with purchasing a home.
Here are some great articles about improving your credit score, so you can get the best possible mortgage.
- 6 Simple Ways To Raise Your FICO Credit Score
- Your Credit Score Affects How Much You’ll Pay for a Mortgage
- Want a better credit score? Here are 5 easy steps.
- 4 Tips to Raise Your FICO Score to Qualify for a Mortgage and Secure a Better Mortgage Rate
And here is great information about the expenses associated with buying a home.
Pre-Qualification and Pre-Approval
There’s a lot of confusion regarding the difference between pre-qualification and pre-approval for a mortgage, but as a consumer it’s beneficial to know the difference.
The first step in looking for a home is to get pre-qualified. A pre-qualification is an estimate of what a lender will most likely lend you based on the limited information you provide. You’ll provide information about your income, assets, and debt obligations. Then with your permission, a loan originator will pull your credit report and look at the various programs available to meet your needs.
The pre-qualification process is very fast, and can be accomplished over the phone. As a result of being pre-qualified for a mortgage, you can immediately begin shopping for a home with knowledge of what you can afford to spend, and have credibility with Realtors and homeowners as a homebuyer with the financial means to purchase a home.
The next step is to be pre-approved, which is a more lengthy process that includes a completed mortgage application providing information about your employment, assets, bank records, credit card debts, and other financial history. A pre-approval letter is not binding on the lender, but it’s subject to an appraisal of the home you wish to purchase and certain other conditions.
Shop Around for a Mortgage
We advise everyone to shop around for a mortgage. So to help homebuyers know what to look for when shopping for a mortgage, we have information on our website that will show you what to look for.
- 5 Factors to Consider in Deciding Whether to Use a Bank or Broker for Your Mortgage
- 8 Reasons for Differences in Interest Rate Quotes
- Zillow: 7 Tips to Secure the Best Mortgage
Buying a home and getting a mortgage is one of the most important financial decisions many of us will make in life. It’s worth the time, therefore, to educate yourself and save as much money as possible.
If you are thinking about purchasing a home or refinancing your existing home, we would appreciate the opportunity to help you get the best possible mortgage. When you’re ready, please contact us to get started.