As you consider buying a home and as you begin house hunting, determining how much home you can afford is one of the most important tasks to complete to ensure that you are fully aware of your affordability options.  In this day and age, a pre-qualification is just not sufficient and a pre-approval is the more true assessment of what you can afford.  Before you actually start to house hunt, it is imperative to choose an end lender to pre-approve you.  This pre-approval process is detailed and thorough and after this is completed you will acquire a letter of pre-approval which lets both real estate agents and sellers know that you are a serious shopper who means business.

Furthermore, a pre-qualification is general, basic and is typically conducted over the phone and does not require you submitting financial statements or documents to prove your financial strength.  You are asked to provide basic estimates about your income, tax returns, pay checks and your income versus your debts.  With this estimated information the lender will then estimate what your maximum loan amount could be if you were to apply.

Subsequently, a pre-approval is far more involved and a trusted realtor with experience can help you gather all of the appropriate documentation.  The lender will prepare your full file including actual documentation of pay check stubs, tax returns, etc. which will verify your income and assets.  This along with checking your credit,  your lender will then calculate your actual debt to income ratio and give you an exact figure of what the maximum loan amount you can carry.  This of course, is subject to a pending contract, market appraisal, underwriting approval and so on…

A great real estate professional should be able to guide and direct you toward this process smoothly and effortlessly.  They should also have extensive knowledge and whatever they don’t know they should aggressively pursue the answers for you.  Typically, the best agents have a circle of trusted industry professionals that they can refer you to, in the effort to provide you with the best resources to make your best move.

So, if you want to get the best deal around town, these top 12 questions may prove to be very informative to you during this process and may help you secure the best loan program out there for your circumstances.

1. What loan programs do you offer and which one is best for me?
2. How long will the pre-approval process take
3. What documents will you require of me to secure my loan as quickly and as painlessly as possible?
4. Are you charging me loan origination points?
5. May I have a good faith estimate highlighting every potential line item I may see on the closing statement?
6. What is your policy on locking rates, and will you honor a lower rate if the rates drop during the application process or lock-in period?
7. Is there a pre-payment penalty on my loan?
8. Is my loan a conventional fixed rate or an adjustable rate?
9. Is there mortgage insurance on my loan?
10. How much down payment will I be required to bring to closing and what is my loan to value ratio?
11. Are you charging me an application fee?
12. When will you collect the appraisal fee?

This entry was posted on Monday, September 8th, 2008 at 2:48 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.