You are now ready to be preapproved for mortgage financing. What should you do next?
- Talk to a trusted lender. Ask your real estate agent, family, friends, or colleagues for local lender recommendations. Real estate agents will want to make sure you have spoken with a lender and completed a preapproval application to ensure that you can be preapproved for financing before showing you homes. If you need a loan to purchase a home, a preapproval letter will be required to submit with an offer letter. The application contains questions such as your address and employment history for the past 2 years, income and asset information, as well as a series of other financial information. A hard credit inquiry will need to be performed in order for the lender to issue a preapproval. What should you expect from a lender in addition to competitive rates and an array of programs? Some people prefer more of a hands-on approach. Working with a lender who provides regular status updates and makes him/herself easily accessible for all of your questions can certainly be an attractive feature. Working with a local lender also may be reassuring, as he or she should have plenty of experience with the market in which you are purchasing.
- Search for homes. Upon being given the green light for your preapproval and a price range within your comfort zone, connect with your local real estate professional to search for homes. Plan to spend time with your agent discussing all your needs for your new home.
- Submit an offer. Your lender will be able to provide an estimate of closing costs and monthly payments for homes that you are considering buying before you make an offer. You will want to be sure you are comfortable with the financial obligation prior to making your offer. With your offer, an initial good faith deposit (earnest money deposit) will be required. Your real estate agent will guide you on the proper amount of the deposit.
Conclusion
Once you and the seller have come to terms, you will look to discuss with your lender the rate and program options to secure (locking in an interest rate and program), as well as to complete the formal mortgage application. The lender will request additional documentation, if you have not already provided documents, in order for you to obtain a conditional mortgage commitment. The lender also will order an appraisal to ensure the property value supports the price you have agreed to pay for it. Your real estate agent will guide you through the various deadlines and requirements in the contract for items like home inspections, ordering a title search to obtain title insurance, and other nonfinancing contingencies. Some areas may require attorneys for contract review and closing, which your agent will discuss with you. As you can see, buying a home is not an instant process. Taking the appropriate steps to prepare for your mortgage preapproval could save you a lot of time and stress.
Mr. Wishnick is a 15-year mortgage industry veteran, vice president of mortgage lending with Guaranteed Rate (NMLS #2611) and was ranked as a Top 1% mortgage originator by Mortgage Executive Magazine. He can be reached at rob.wishnick@rate.com.
All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate does not guarantee the quality, accuracy, completeness or timelines of the information in this publication.
