Mortgage Pre-Approval Before House Hunting
It is important to have mortgage pre-approval before house hunting. In fact in today's housing market, it's vital. Getting a pre-approval letter needs to be the first step in the home buying process, really.
Mortgage pre-approval is the process a buyer like you goes through to find out how much house you can afford. You talk to a mortgage consultant about your income, the debt you already have, and figure out together how much of a monthly payment you can afford. You should also have the "payment shock" conversation - let your consultant know just how much you're willing to pay. If you pay $500 a month in rent, you may not want to jump into a $1200 per month mortgage payment, even if you can technically afford it.
Mortgage pre-approval will require you to talk about your income, proving you have a job and how much you make. Your mortgage consultant will also pull your credit. To answer an often asked question, pulling your credit will not hurt your credit score. The credit bureaus understand that you will probably shop around a bit for the best interest rate, so multiple lenders may pull your credit. The effect on your FICO score is minimal.
Many real estate agents in the current housing market want (or require) house hunters to have mortgage pre-approval before showing houses to them. Because financing can be difficult for some folks, and many Americans have credit "dings" right now, real estate professionals want to know that you're already talking to a lender and you can afford a house.
Watch this short video about pre-approval and what it means for you. Our 60 Second Mortgage Tip videos really are just 1-minute long.
You can click here to see the video - 60 Second Mortgage Tip: Mortgage Pre-Approval Before House Hunting
If you've already been pre-approved with one lender, that doesn't mean you have to stay with your first lender. Maybe that mortgage bank won't return your calls, or maybe their loan closing times are too far out for you. Whatever the case, a pre-approval letter is not a contract to stay with that lender. Make sure you're getting the service you need.
The bottom line for the first time home buyer (and any borrower, really) is that mortgage pre-approval is the first step in the home buying journey. A mortgage consultant not only helps you figure out how much house you can afford, but helps you plan for other expenses like homeowners insurance and property taxes. The escrow account that pays for these things needs to be accounted for when you decide how much to spend on a home.
If you're ready to talk to a mortgage consultant about the pre-approval process and getting started, click the button below. We'll have one of our loan officers talk you through the process so you can get started house hunting.
(first step photo credit)