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The Golden Ticket to Homeownership

Why Should I Get Pre-Approved Before House Hunting?

Imagine yourself going to Disney World for the first time in your life. You heard about the memorable Tea Cup ride, the amazing actors who bring Disney characters to life, and the beautiful fireworks show at night above the castle. You’ve planned this moment in your head for years and have your bags all packed with a weekend’s worth of clothes to enjoy the trip. After spending hours on the road, you’ve finally arrived to the entrance of the theme park to meet the mouse yourself. However, you walk up to the ticket handler that allows entry and you realize that you have no ticket to give to them. Now you are stuck at the entrance to the park and your planned trip has come to a screeching halt.

When house hunting without a pre-approval letter, it has the same kind of effect with your goals to be a homeowner. Those letters are your golden ticket to securing a home when making an offer. The pre-approval letter is a document from a financing establishment that informs the seller that you have given enough documentation to your lender to support that you are financially able to secure a home loan.

Now you may come across a lender that sends you a pre-qualification letter, and this one has a little less power compared to a pre-approval letter. Being pre-qualified means you gave basic information to the lender (such as current gross income and credit score) and they can determine you can buy a home at an established price point. It can signal the seller that the buyer hasn’t provided enough support such as tax returns and bank statements to fully determine if they can secure a home loan.

Getting pre-approved for financing can be a little intimidating as the lending company may ask for confidential information such as your tax returns, gross income, bank statements, and your debts/assets. However, this information is essential to confirming with the lending company that you are financially secure enough to make consistent payments on your mortgage, which was a process that wasn’t being done regularly before the 2008 market crash. With new regulations in place, lenders will do everything they can to ensure you are not putting yourself in a negative financial situation, and will help you feel confident in your ability to get a mortgage.

Pre-approval letters can be obtained in a myriad of ways. The most common method is contacting a local lender that can offer special programs such as the First Time Homebuyer Program. Other ways include going through your bank/credit union, or using a private lender/investor who will loan funds. However, these methods aren’t very common and could delay or postpone your intended closing date for the home. Sometimes your real estate agent may have great references, through experience, that can connect you with amazing lenders.

Homeownership is a lengthy progress, but the dedication and determination to meet the needed requirements will be worthwhile, and you’ll get to have a place you call home!

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