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By Syd Johnson
The real estate market is soaring because of low interest rates that have
brought home buying to average Americans. All over the country, more renters
are buying and homeowners are upgrading their properties. In this hot
seller’s market, a pre-approval letter from your mortgage lender can help you
secure a winning bid on the home of your dreams.
A pre-approval involves much more than filling out a questionnaire. It is
essentially going through the entire mortgage application process and having
the lender give you an exact figure of how much money they are willing to
lend you and at what interest rate. Having the letter is like having the cash
in the bank. This shifts your focus from financing to getting the best real
estate agent and finding the best home that you can afford.
Pay attention to the terms of the letter before you start shopping for your
home: What terms did your mortgage lender extend?
A simple prequalification where they took down your information and made an
informal guess of what type of loan you will receive is usually not very
effective. This basic prequalification of course is subject to running a full
credit check, full disclosure of your assets, and no drastic changes in your
financial situation.
Any lapsed payments on credit cards, student loans or a job change, can give
your mortgage lender sufficient reasons to back out of the deal.
Here’s how to get the maximum benefits out of the pre-approval process:
1. Start by using the resources on any major search engine. Look for “mortgage
lenders,” “home loans,” or “pre-qualify for a mortgage”.
2. Fill out an application and make sure it goes through the underwriting
process. If you’re not sure, call the lender using their customer service
number and ask them what happens after all the information is submitted.
3. Find out if there are any fees involved for pulling your three bureau
credit reports, and for the underwriting. Some lenders will charge the fees
up front and others will wait until you are approved for the loan.
4. Fill out any extra paperwork such as proof of employments and statement of
your resources. You have to prove that you enough cash on hand for a down
payment, unless you are getting a no money down home loan. Also, you have to
prove that the cash is yours and not a loan.
If you want to a loan from your parents for example, try to get it six to
eight months in advance and keep it in your savings account. Otherwise, it
will count as a debt and could increase your debt to income ratio and have
the opposite effect; showing that you don’t have any cash and disqualify you
from a much bigger loan.
5. Get a pre-approval letter from the lender stating the exact amount of the
loan that you will receive and the interest rate.
6. Pay attention to the expiration date on the letter. If you are in a market
such as Southern California where competition is particularly fierce, make
sure you have the most flexible expiration date that your lender will allow.
Whether it’s 30 days or 60 days, get it stated in writing. If you lose out on
your first or second choice for a home (typical), you won’t be stressed to
settle for anything just to get a house.
Syd Johnson is the Executive Editor of RapidLingo.com (http://RapidLingo.com),
Financial Solutions Website. You can see more articles at http://www.
rapidlingo.com (http://www.rapidlingo.com).
This article may be freely distributed as long as the author`s bio is included
with an active link to http://www.rapidlingo.com (http://www.rapidlingo.com).
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