Loan Pre-Approval

01
Choosing Your Lender

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with our team is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

02
Rates and Fees

A pre-approval means knowing the current interest rate and fees that will be needed in addition to your down payment.

Often home buyers, even experienced ones can get surprised by the additional fees needed to buy a home. Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

• Government recording costs
• Appraisal fees
• Credit report fees
• Lender origination fees
• Title services (insurance, search fees)
• Tax service fees
• Survey fees
• Attorney fees
• Underwriting fees

This critical first step will provide you the power of knowing what you can borrow and afford. Here is the other thing: if you’re pre-approved, you also have a better sense of your budget, what you can afford, and ultimately how much you’re eligible to borrow for your mortgage. This way, you’re less apt to fall in love with a home that may be out of your reach.

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