Move to Step 2
Why do I need to get "Pre-Qualified" or "Pre-Approved" first?
Really, the reason is pretty simple: most people cannot buy a home without a loan. If you are one of the lucky ones that can pay cash, this step is not a concern for you. Go ahead and move to Step 2. However, the majority of home buyers require a mortgage. More importantly, most Buyers and their brokers will not even accept an offer from you until you can prove you have been "Pre-Qualified" at a minimum. Personally, why would you want to be looking for a home before you know what you can afford to pay? So, here is the basic information to consider when getting a home loan. After reviewing this data, move onto Step 2 in the home buying process.
Pre-Approved vs. Pre-Qualified
What is the difference between Pre-Approved and Pre-Qualified? Pre-Approved indicates you have gone through a more detailed process to determine whether you can be qualified for a loan and in what amount. You will have to provide much more data to be pre-approved. To be pre-qualified, you generally only need to provide a lender with your basic debt, income and assets. While pre-qualificaiton might be ok for a short time, get pre-approved to avoid surprises after you have found the home you want.
Selecting A Lender
There are many ways to select the lender you use. Often times, I find clients want to use their chosen bank (BB&T, State Employees Credit Union, Wells Fargo, etc.). Sometimes, people want to use their brother, cousin, college roomate or other person they know. Both of these methods are bad ways to select a lender. Instead, you should interview at least two mortgage brokers to see which fits your needs and personality. Specifically, you should be primarily concerned with their service (responsiveness and communication skills) and their understanding of loan alternatives that might help you. If you need help, we can recommend top local lenders in the industy that provide top service with the lowest loan fees. Generally, banks will have fewer loan products available and they will attempt to fit you into one of their programs. Mortgage brokers generally have more options and can help you select from a broader range of products.
Loan Types
There are many different loan types available today. Some of the most common are FHA, USDA, VA and conventional mortgages. Each one of these loan alternatives comes with its own set of rules and interest rates. In addtion, there are different types of terms within these products. You can have 30 or 15 year fixed mortgages or adjustable rate mortgages, where the rate starts off lower but can change every certain number of years. As a result, you need a lender that understands your needs and can help you find the right loan.
What Data Do I Need To Gather?
When you get ready to be pre-approved or have found a house and are ready to move toward closing, there are many items you will need to provide you lender. Although each lender will likely provide you with their specific list, the list provided above will enable you to start gathering the data you will need.
As you are moving through the loan approval process, it is important for you to immediatately respond to any questions from your lender. If your lender calls asking for information, you should get it to them quickly. Often times, an underwriter is reviewing your file and needs something to complete the file for closing. For that reason, you do not want to hold up the process.