Hello Prospective Purchasers! Cynthia Larsen, Broker/Owner of Safe Haven Realty located in Sonoma County, California recently wrote a great blog about the importance of being pre-approved for a loan.
Very often, home buyers want to start looking at property prior to speaking with a lender. Read on for reasons why it is so important to speak with a lender before you start looking at homes.
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The chicken and the egg. Which comes first? When a potential buyer calls and wants me to show them a home, one of my first questions I ask is are you pre-approved for a loan? The reason for this question is simple. If I don't know what you are qualified for, I will have no idea what homes I can show you.
Buyers, I know this may not be what you want to hear, but you MUST get pre-approved for a loan before asking to be shown homes. Your pre-approval letter contains very important information.
- The maximum purchase amount - It makes no sense whatsoever to show you homes that are above the maximum purchase amount you qualify for, unless the home is overpriced. That I can determine by looking at comparable properties that have recently sold nearby.
- Whether you have chosen a direct lender or a mortgage broker - If you are using a mortgage broker, I cannot show you HUD-owned homes. HUD requires a pre-approval letter on a direct lender's letterhead.
- The type of loan (Conventional, FHA, VA) - If you are qualified for anything other than a conventional loan, buying a condo or a "flipped" home can be very difficult and time consuming.
- Loan and/or Funding Conditions - We need to talk about your ability to provide documentation the lender requires on a timely basis.
I understand that you might not want to get pre-approved until you find the right house. Or maybe you won't want to buy a house at all if you find out that $xxx,xxx can only get you a home in need of TLC in a less than desirable neighborhood.
We won't know that until you get pre-approved. In Real Estate, the pre-approval letter must come first. Let's call it the chicken. After that, we can go out together and look for that perfect egg.
Catherine Condon, Broker MA & NH