Few experiences are more frustrating than falling in love with a home that’s for sale and then discovering you can’t afford to buy it. The majority of First-Time Home Buyers need to finance their home purchase. A consultation with a Mortgage Broker is a crucial step in the home buying process because you need to understand your purchasing power before you begin to look at homes.
What Is a Mortgage Pre-Approval?
Most Lenders will offer borrowers a Mortgage Pre-Qualification Letter or a Mortgage Pre-Approval Letter. But most REALTORS® recommend that you get Mortgage Pre-Approval before shopping for a home. A Pre-Qualification letter will state the amount a lender thinks you can borrow based on your income and your credit profile without any actual documentation. Mortgage lending standards have tightened since the housing crisis and all loans now require full documentation and verification of income and assets. Astute sellers know this and will only accept an offer from a buyer with a full Mortgage Pre-Approval letter that’s based on verified information.
Sellers aren’t the only ones who benefit from you obtaining a Mortgage Pre-Approval. You’re better off with Mortgage Pre-Approval for two reasons:
First, you’ll have gone through the credit check and paperwork requirements for a mortgage, so you’ll have clarity about your ability to finalize a home purchase. If the lender finds a problem with your credit or an error on your credit report, you’ll have time to fix it before making an offer.
Second, since your documentation will already be in place, a Mortgage Pre-Approval based on everything other than the actual value of the home you’ll purchase will speed up the process once you make an offer.
How to Find the Right Mortgage Broker
Your REALTOR® might be able to recommend a Mortgage Broker for you to interview. You can also ask friends and colleagues for someone they trust. You should check a Loan Officer’s NMLS license and read reviews online to be sure you’re working with someone reliable. As a First-Time Home Buyer, you should look for someone experienced with First-Time Home Buyer needs, one help you identify those loan options that fit your particular situation.
What to Expect From Your Broker
The best Mortgage Brokers take a collaborative approach with borrowers and take the time to explain all your loan options. When you feel your comfort level is right, your broker will check your credit report. You should expect feedback about ways to improve your credit profile that might increase your loan approval potential and perhaps improve the terms of your mortgage. You should expect recommendations for how to handle your money between the time you apply for a loan and settlement day. Your lender should provide advice about when to lock in your loan rate and discuss the pros and cons of various loan programs.
What Your Mortgage Broker Expects From You
Your Mortgage Broker needs you to be honest about your finances and responsive to all requests for additional information. They may seem burdensome and unimportant to you, but it is important to the mortgage approval process. The more cooperative you are, the easier the loan process will be.
Your Mortgage Broker will submit your application file to your lender of choice. The lender will analyze your documentation and generate a Mortgage Pre-Approval Letter based on your debt-to-income ratio and credit score. However, you should also consider your budget and your own comfort level with a payment. There’s no need to borrow the maximum amount you qualify for, particularly if you know you plan to spend money on items that don’t show up on your credit report such saving for a college education(s), a new car down the road, or vacations.
Your careful planning and preservation of your emergency fund are important for responsible, long-term homeownership. In today’s dynamic housing market, First-Time Home Buyers can own their own home when they demonstrate the financial responsibility to deserve one.