Why get pre-qualified for a mortgage before you begin your search for a home?

There are many steps in the loan process. After pre-qualification, you must get pre-approved. Your pre-approval is going to give you any conditions you'll need to meet prior to approval. This process, including your inspection period and appraisal, can take up the entire time you've been allotted to get your loan closed. Would you want the benefit of a heads up prior to committing to a contract? A proper pre-qualification will give you an idea of what to expect. Of course, there's others that will benefit from your pre-approval: Your Agent, your Lender, and the seller from whom you eventually buy a home! However, tfurther along you are, the more you benefit. Being prepared is a crucial advantage.

You: There are simply too many variables--credit history, income, debt, special mortgage programs and variations in qualifying guidelines between different mortgage types-- that need to be determined. How do you know what to offer if you don't know the guidelines of your loan? Not only for the amount you qualify for but if there are guidelines for the property and or negotiating ability when it comes to writing your offer. The only sure way of getting the questions answered is through pre-qualification. The mortgage pre-qualification step begins the process of formally applying for a mortgage, and it gives everyone involved--especially you--a clear sense of the direction they should be headed. most important beneficiary, of course, is you.

Your Agent: By knowing what your financial parameters are, your Agent can spend more time looking for houses that "fit" and less time pursuing dead ends. Some loans even dictate negotiating guidelines. How can your agent know the limitations of your loan if you haven't qualified for one yet? When it comes to mortgages and purchase contracts, "yes, but" doesn't carry much weight! Nor does, “I didn't know”.

Your Lender: Some loans don't close on time is because the lender wasn't given enough time to prepare the buyer for the loan conditions and requirements. By knowing your financial parameters, your lender can advise you and your realtor so everyone will be prepared for your contract to come in so they can get the process going quickly and efficiently.

The Seller: Want to strengthen your bargaining position with the seller? Want your offer to stand out in a case of multiple offers for the same house? Look at it from the seller's perspective. If you had 2 offers on the table for your house, one from a fully pre-qualified buyer and the other from an "I'll get around to that soon" buyer--to which offer would you devote the most attention? Even if the pre-qualified buyer's offer was $1,000 less, would you trust that buyer and take the chance that they may not be qualified?

Remember that the amount of mortgage you will qualify is for the maximum amount that both you and your lender feel you can afford. Discuss with your lender your approximate down payment and closing costs so as to not push yourself to the limit. Do you need to plan on saving some of your money to purchase items for your home? (such as window coverings, furniture, or appliances, for example) Did you consider increases in monthly expenses (for example utilities, maintenance and repair costs)?

Your first thought may be to go to your bank for a loan. The primary business of a bank is banking, not mortgages. Banks have a portfolio of mortgages they offer, if you don't fit within their qualifying criteria they won't qualify you for a mortgage. A mortgage broker represents lots of different lenders, including banks, so they can shop around to try to find one who will make you a loan specific to your needs. They are not limited to one bank's loan products nor borrower qualifying criteria. Not only do they offer a wide selection of loan products from many different lenders, but they also get wholesale rates from many lenders. They then add their fee to that price, just as the loan officer at the bank will do if you go to them directly. So in the end, the pricing should be very comparable. And, if the lender goes out of business or stops offering the product you qualified for, the mortgage broker just shops lenders to move you to. If you have a good broker, there will be a smooth transition with little to no time lost.

Realtors don't just recommend getting pre-qualified with a lender first for their own benefit. Once you decide to make an offer on a home, your “buying team” if you will, is you, your realtor, and your lender. Realtors choose to do business with lenders that have earned their trust through proven success. Often that preferred lender was given a chance to save a deal just to get their foot in the door. If that lender succeeds they continue to take on tough loans until the agent is confident in that lender. It helps if the lender has several different loan programs to accommodate different situations. They also need to be flexible and responsive throughout each entire transaction. As you know, buying a home can be a stressful time and the financing should be kept as simple as possible. There are realtors out there who have been lucky enough to find a loan officer they can trust to deliver a smooth transaction without last minute mortgage problems. If you planned on using a lender of your own, it is still a good idea to shop your realtor's lender for the leverage and familiarity they will have. Being prepared is a crucial advantage.