Being preapproved before looking at homes is always the correct way to do things when buying a property but when should you get preapproved, why, and what is it?When Should We Get Pre-Approved for a Mortgage?

Being preapproved with a lender is more than simply typing in your income in a mortgage calculator online and seeing how much you can afford. No one has actually gone over your income, assets, and liabilities to see that they will approve you for a loan. These prequalification calculators are simply there to give you an idea of how much things would cost once you add in the principal and interest, taxes, homeowners insurance, and any down payments as well as interest rates. But to really get preapproved you have to talk with a lender or go through an online application process. You may think you can afford that $400,000 home but once a lender looks at all of your income and your debts and devises your debt to income ratio, you may only be approved for $350,000.

Why is this important?

If you’re looking at homes out of your price range you’re only going to get disappointed when you realize you can’t buy the house. By getting preapproved first, you know the price range in which to keep your search. You may be able to search a little bit higher than your maximum price range and offer a lower price depending on the market and the house, but it’s important to stay as close to your price range as possible.

Of course, you can always look for homes under your price range, which will give you a little more cushion in your monthly housing payments. Remember, preapproval means that is the maximum amount you are allowed to spend on a home so if you max that out, you may not have additional funds during the month for upgrades, repairs, or other items.

Related: Should you get a loan for a commercial property?

So when should you get approved?

If you’re serious about buying a home within the next 6 to 12 months it’s important to shop around and find a lender that you like, feel comfortable with, and is competitive in prices. This can be your local bank, credit union, or like us, a mortgage advisory company. We have access to hundreds of different loan programs and options, which means we can usually get you the best rate. Going with a mortgage officer typically costs a little bit more upfront than a bank or credit union, but because of the wide range of choices you have, you’ll probably be spending less money over time.

Related: Pre-approval makes you a Quality Home Buyer

Go through the application process with a lender, produce any and all documents necessary including W-2s, tax returns, profit and loss statements for self-employed, identification, credit card information, assets, debts, liabilities, and all income. From here, lenders will either tell you you are approved, your rejected, or what you can do to get a better rate. Perhaps you just need to pay off a couple of credit cards to get an interest rate that works better for a monthly payment. Perhaps there are some issues on your credit history you were unaware of that can be easily resolved. By correcting all of these items, putting a plan in place, and coming up with a great strategy, you can fill comfortable about your monthly housing payment and get the home you really want.

So, before looking at any homes, if you’re serious about wanting to buy a property, talk to a lender today.

Give me a call to find out what kind of programs are available to you, what it means to check your credit report and history, and how much you can afford.

Jackie Barikhan
949-600-0944
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