Shopping for a Mortgage - Nasty Surprises
It seems like more buyers are beginning to understand the necessity of getting pre-approved before looking at homes.
Buyers tend to do a lot more research online theses days before jumping into looking at homes and of course, getting pre-approved is tantamount to their success. After all, you can't even make an offer on a home without a pre-approval letter if you're financing.
Pre-Approvals Are no Guarantee
While many buyers have learned, or real estate agents coach buyers to shop around for competitive rates, there are more reasons to get pre-approved with more than one lender than just rate comparisons. I'd like to give you an example; pre-approval is different than pre-qualified and sometimes unpleasant, unexpected things come out in the process and better to know ahead of time for those buyers wishing to avoid headaches and setbacks in achieving a new home.
Just one example, a buyer might have a few sources of income. Perhaps they are hourly or salaried, and part of their income is commission-based. The buyer goes to a mortgage lending site, doesn't talk to an actual mortgage lender, and the automated system spits out a pre-approval letter for $200,000. Good to go and request showings, right? Not necessarily.
Upon shopping around the buyer then talks to an actual mortgage lending officer who takes a closer, trained look at the buyers finances and tells the buyer that because of the percentage of his income that is commissioned-base, he can only get pre-approved for $180,000.
That's great, but upon shopping yet another lender offering an even better rate takes an even closer look at the buyer's income and informs the buyer that because a notable percentage of the buyer's income is overtime, they can only get approved for $150,000 a far cry from the original $200,000 quoted by an online pre-approval system.
In closing, it's best to talk to an actual mortgage lender. Going to some online site in order to avoid having to talk to an actual person to get an idea of what you could qualify for is not in your best interests. When it comes to choosing a lender, your best bet is to actually ask a professional buyers' agent. Realtors keep several lenders in their back pocket they like to work with because of relationships built of out of trust and performance, and agents know which lenders have the loan products suitable for different situations and types of properties.
Ask me and I'll be glad to make you some referrals.
Another thing important to understand, pre-approval is not the same as pre-qualified but it's a start. It all boils down to the home in question and where your finances and credit are during the period of having an accepted offer and closing. Once an offer has been accepted, the underwriters are going to heavily scrutinize the home, credit, debt to income and more, right up until closing day. It's important to protect your credit and keep your debt to income ratio satisfactory. Some buyers blow it, celebrating after having an accepted offer and making a large purchase on credit or applying for new credit - don't do that, you could get denied.