Posted By Lindsay Faircloth @ Jan 31st 2012 2:01pm In: Buyer Info

So you're ready to buy a house, congratulations! You drive and drive and look online and find the houses that you like and the areas that you want to be in. You know what you're doing, you went online and used a mortgage calculator to figure out what you wanted to pay every month and that told you how much you could spend. Now you're ready to call a Realtor and see some homes, right? WRONG!! Calling a Realtor was a great first step, if you chose the right one, you know what your next step is. Who can tell me?, in the back?? That's right GET PRE-APPROVED! Now don't get irritated just yet. There's a reason I am telling you this, to protect you! I have seen people fall in love with a property, make an offer and then call a lender, only to find out that they don't qualify for that home. It is a harsh reality when you have to readjust everything you have been doing and move in a different direction. If you had taken the step before looking it would have save a lot of frustration and heartache. Here are 3 reasons to have your pre-approval in hand when you go to look at homes.

  1. Thinking you know your credit and knowing it are two completely different things! I have heard so many times, "My credit is pretty good, as far as I know". What if you don't? Then what? Knowing your credit history and score gives you the power to make informed decisions. Whether it is an old collection you didn't know about, a case of stolen identity, or a score that gets you a better interest rate than what you were thinking, you should know this ahead of time. One more thing, "shopping" for a mortgage is far different from apply for unsecured lines of credit like store credit cards or other lines of credit. It will affect your score in the same way nor will it damage your score. 

  2. Some sellers require that all buyers be pre-approved! While most sellers may not do this, they certainly have the right to limit their viewings to only those who are pre-approved for that amount and I have seen it happen. Banks, on the other hand, such as short sales or foreclosed properties, will ALWAYS required proof of funds or pre-approval letter to be submitted with any and all offers.
  3. It puts YOU in control! With a pre-approval you know exactly how much you can spend, how much your payment will be, what your interest rate will be, and everything that is included in your payment. Some calculators online don't include PMI (private mortgage insurance) which is required on every loan that does not have 20% down. Other costs associated with your monthly payment may include, taxes, insurance, hoa dues (if applicable) principal and interest. Knowing these things will keep you from being surprised down the road and will allow you to play around a little bit with your purchase price. Also, on a side note, stick to your budget! Just because you are pre-approved for a certain amount doesn't mean you HAVE to spend all of that! A lender doesn't consider your groceries, entertainment, gasoline, electric, water, etc. YOU are the only one who truly knows what you can afford each month. If you stick to that, you are ahead of the game!

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