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Home Buying: Where to start

by | Oct 2, 2016

Home Buying – Plan Ahead

Have you ever gone shopping without your wallet? You find the perfect thing, but by the time you go home for your wallet and come back, someone else will buy it because they planned ahead. This is why the first step in home buying is to get your financial ducks in a row. You will need proof of funds or a lender letter before any decent agent will take you house hunting.

 

Before you start shopping, it’s a good idea to:

  • Set Budget: Set a budget (a mortgage broker can help with this)
  • Plan Down Payment: Plan for a down payment (typically between 10 and 20 percent of the asking price)
  • Get Credit Report: Get copies of your current credit report
  • Improve Credit: Become an optimal credit candidate
  • Get Preapproved: Get preapproved for a home loan

What Will a Lender Require?

Credit & Finances Assessment: You’ll want to meet with a mortgage broker or lender, who will assess your credit and finances to determine whether you are “mortgage-ready”. Getting a preapproval letter can give you buying power when you’re shopping around, since sellers may prefer to contract with a buyer who qualifies for a mortgage.

Prequalification Letter is NOT Loan Preapproval

A prequalification letter is NOT the same as a preapproval. The prequalification basically means that a lender checked your credit, but this does NOT guarantee a home loan approval. Preapproval or “approval letter” means your lender examined your qualifications and determined that you can obtain a home loan, provided your financial situation remains the same throughout the home buying process.

Items your lender will request before issuing a preapproval letter:

  • A credit checkCredit
  • Current bank statements
  • Pay stubs
  • Tax returns
  • Other documentation

 

Next step: Hunting