Pre-approved Mortgage advice

[Theta]

We are thinking about buying our first house in an area where houses go under contract within days, sometimes, hours. Does it help to say you have been pre-approved for a mortgage? If so, where does one start shopping around for a mortgage.

 

[Alesia]

It's always better to be pre-approved. Just start calling mortgage lenders in your area and see who gives you the one that works best for you.

A good realtor will help you navigate this process

 

[firefly_ris]

Yes, if you have your pre approval then you can get an offer in faster.

 

[Mackenzie Click-Mickelson]

Granted we were building a house so different but none of the builders would meet unless you had a pre-approved mortgage letter and they wanted to see that letter in order to discuss the options.

In our case we had a buyer's agent. He was there for us not the home seller. In our case with a new build too he was fantastic going with us to the last walk through helping us out on things we wouldn't have thought to look (like the paint job on the tub wall in the master bathroom) and the like.

 

[TwoMisfits]

Get pre-approved...but then also understand what you really can and want to pay.

For example, a bank may pre-approve you for $500K, but you can't imagine buying a house for more than $400K. Stick to what you think.

However, conversely, you may think you can afford $500K, but the bank approves you for $400K. In this case, stick to looking for houses at the bank's number.

 

[barkley]

yes, get preapproved (when we sold both our prior homes we wouldn't entertain offers from non preapproved persons).

we've had multiple mortgages and the best experience ever was by using a local credit union. great rates, most reasonable fees, never sold off the mortgage to another lender (happened multiple times with other lenders).

 

[Judique]

We are thinking about buying our first house in an area where houses go under contract within days, sometimes, hours. Does it help to say you have been pre-approved for a mortgage? If so, where does one start shopping around for a mortgage.

You might want to make contact with a realtor who knows the area that you are interested in. I haven't needed a realtor in quite a while, but have bought and sold quite a few homes in the past. Most realtors are in touch with lenders that they go to when they have a prospective buyer.

The other option is to contact your own financial institution, whether it be a bank or credit union. Some of them give seminars on financial decisions such as home buying. You can educate yourself on the process and perhaps make some contacts in the mortgage financing world to help guide you through the process of understanding just what a preapproval is and what it takes to get a loan underwritten, and what type of loan is right for the future you are aspiring to. The cost of a loan is dependent quite a bit on your credit worthiness and sometimes it helps to get things 'cleaned up' before you enter the homebuying arena. A preapproval can provide a snapshot to a seller and their agent as to whether you can complete the process of buying the house, but it doesn't bring out everything.

 

[tzolkin]

In our area, most realtors won't even take you to look at houses unless you have been pre-approved. It's for the exact reason you mentioned-- houses will go under contract very quickly. So there's really no point taking you to look at places that will likely already have a contract on them by the time you get your pre-approval. Our current house had 7 offers in the first day (it was a fixer-upper that they way under priced).

Also, many sellers don't want to allow people to book a showing unless they are pre-approved. Especially if it's a family still living in the home. It's an inconvenience to make sure everything is perfect and leave every time someone wants to look anyway, so most people would be very annoyed if they learned they were cleaning and going out just to have people who can't even afford their home look around.

You do have one advantage in that you don't already own another home. That's another factor here. Someone else's offer is not going to be as appealing if it's contingent on the sale of their other home. That has worked out well for us because we have been in a financial position where we did not need to sell our previous home in order to be able to afford the house we were buying.

Get pre-approved...but then also understand what you really can and want to pay.

And, yes to this. I'm not sure how financially savvy you are, but don't just automatically believe what the bank says that you can "afford". I would always recommend to do your own calculations and buy well below your means. You may be able to afford the house/mortgage payment, but what they calculate doesn't leave you with enough money to enjoy anything else.

This is actually why we've never needed a contingent sale; because the bank has always said we could well afford both houses (so they just approve us for the second loan). Technically, yes, we could make the payments on a home that was as expensive as both houses combined, but it would be impossible to meet any of our other financial goals.

I just looked at two online calculators to get an idea. They say we can afford a $700k house. There is absolutely no way. The most expensive home we have ever owned was $240k and our current home we only have a $50k mortgage on.

 

[_19disnA]

When we were recently selling our house, realtors would only show it to clients who were pre-approved. Our impression was this was not so much about how fast a house might sell, but rather to not waste the realtor's (or seller's) time showing a home that was clearly not within the buyer's budget.

If your first time buying a home, best to work with a realtor who can provide knowledge about all of the things associated with buying (i.e. home inspections, contingencies, offers, mortgage, etc.). When a market has homes selling quickly, you need to be careful to not overpay. Asking the realtor about expanding the areas where you look can make a BIG difference in prices.

 

[mi*vida*loca]

In my area you can't even go looking at houses until you have a preapproval.

We also set our limit. We told the bank we only wanted to spend up to X amount of dollars. We were preapproved for more but our preapproval letter only stated the amount we set. That way the realtor wouldn't take us to homes that were out of our budget.

 

[RamblingMad]

Buy half the bank’s number. You’ll have more flexibility in the future.

When I moved, I had to get approved to carry my existing home and my new home even though I only carried both for a little over a month.

 

[Jimsig]

Even after getting pre-approved don't go making any large purchases where you also need credit such as a car or opening a new credit card/credit line etc. That can hurt you from anywhere from a higher interest rate on your mortgage, getting approved for lower then you expected/less then what the house costs, to even getting declined when you go for the actual mortgage. Wait until you have closed to do any thing like that.

 

[Mackenzie Click-Mickelson]

Buy half the bank’s number. You’ll have more flexibility in the future.

When I moved, I had to get approved to carry my existing home and my new home even though I only carried both for a little over a month.

Eh I wouldn't recommend half. Lot of that is dependent on the housing market. Certainly being more conservative than what your approved rate is is prudent but if you're in a seller's market vs a buyer's market being that conservative may mean you're missing out on available homes or you're restricting yourself so much that you end up in a home you don't really want for longer term.

 

[Mackenzie Click-Mickelson]

Even after getting pre-approved don't go making any large purchases where you also need credit such as a car or opening a new credit card/credit line etc. That can hurt you from anywhere from a higher interest rate on your mortgage, getting approved for lower then you expected/less then what the house costs, to even getting declined when you go for the actual mortgage. Wait until you have closed to do any thing like that.

During our process our mortgage broker even had us signing paperwork that we fully understand that buying big purchases, even furniture, is highly unadvisable and may affect your mortgage rate.

For us our credit was pulled at pre-approval and then again just prior to closing. For us that amounted to something like 8 or 9 months of being under strict orders to not purchase anything large (that included meeting with builders, committing to a builder and the time spent building our home). It's not just things where you'd need credit it's putting things on your credit card that goes to your credit as that could impact your debt/income ratio.

 

[RamblingMad]

Eh I wouldn't recommend half. Lot of that is dependent on the housing market. Certainly being more conservative than what your approved rate is is prudent but if you're in a seller's market vs a buyer's market being that conservative may mean you're missing out on available homes or you're restricting yourself so much that you end up in a home you don't really want for longer term.

Then realize the challenges when buying a new home after the first. You’ll definitely be contingent on bids on new homes. You might have to get a bridge loan. You might get an ideal starter home but a less than desirable second home.

 

[SandyinMonterey]

We are thinking about buying our first house in an area where houses go under contract within days, sometimes, hours. Does it help to say you have been pre-approved for a mortgage? If so, where does one start shopping around for a mortgage.

Always a good idea to get pre-approved. Especially if you’re in a hot market. We purchased our second home 4 years ago. It was a hot market (still is/ desirable area with great schools). We knew of a home coming on market. As soon as it did my husband was there to look at it in hours. There was already a lot of interest. Ended up we put in offer that night & there was another offer coming right behind us. We were pre-approved & it helped & we got the house. You didn’t mention as soon you hope to purchase but get finances in order, watch hour spending. No large withdraws OR deposits to savings. Watch your credit cards. They check it all. Good luck.

 

[Mackenzie Click-Mickelson]

Then realize the challenges when buying a new home after the first. You’ll definitely be contingent on bids on new homes. You might have to get a bridge loan. You might get an ideal starter home but a less than desirable second home.

Ok..but I'm not talking about that stuff. Why would you need to get a bridge loan or anything like that. I'm not stating spend over or really close to your pre-approved rate. I disagreed with your advice of spending half and stated it would depend on one's area. Some people go for dirt cheap and then realize they are completely unhappy and then they go through the whole process quicker than before. There can be a happy medium.

You just mentioned flexibility. In a seller's market that could actually hinder your flexibility even in the future.

 

[RamblingMad]

Ok..but I'm not talking about that stuff. Why would you need to get a bridge loan or anything like that. I'm not stating spend over or really close to your pre-approved rate. I disagreed with your advice of spending half and stated it would depend on one's area. Some people go for dirt cheap and then realize they are completely unhappy and then they go through the whole process quicker than before. There can be a happy medium.

You just mentioned flexibility. In a seller's market that could actually hinder your flexibility even in the future.

If homes cost much more than 20x rent, I’d just rent.

 

[Mackenzie Click-Mickelson]

If homes cost much more than 20x rent, I’d just rent.

Yeah ok you're starting to talk about things I'm not talking about. It's whatev and we'll just leave it at that.

 

[tvguy]

If homes cost much more than 20x rent, I’d just rent.

Just curious. Why? My daughter just bought half a duplex. She bought, because it is cheaper than renting. Her payment with taxes and insurance is $500 a month less than what those units rent for. The rental market here is nuts.