Home Buyer Strategy Session 2: Getting Pre Approved For A Mortgage

Home Buyer Strategy Session 2

Welcome to the second lesson of our buyer strategy session. In this video, we're going to talk about the pre-approval process, and with that we're going to talk about the importance of it and then also the things that you need to do to make sure that you get pre-approved.

One of the major reasons to get pre-approved is simple. It's basically if you walk into a house and you really like the place and you really want to make an offer, if you're already pre-approved, meaning that the bank has already got all of your documentation, and they said like, hey, based on what your income is and what your debt is and all of those things, all your financials, you qualify for a said dollar amount to buy a house. So with that being the case, you can now take that pre-approval and go and buy a house. With that, there also comes the ability to write an offer basically on the spot. So if you're already pre-approved when you're out and about and looking at homes, the moment you find one, you and your agent can sit down, come up with an offer price, and you guys can start crafting an offer and submit it that day, if you're not pre-approved and you find a house that you like, then you have to then stop everything that you're doing to go through the pre-approval process.

Sometimes the pre-approval process can take a few days based on whatever your file looks like, credit, income, debt, and your assets, all those things factor into it, but sometimes if you have a complex situation, it can take longer than just a few hours or a day or so. So now if you see a house, and especially if it's in a hot market, if you see a house and it is still on the market and you still have to wait 2, 3, 4, 5 days to get pre-approved before you can submit an offer, sometimes that house is already gone and they've already sold it to someone else. So getting pre-approved is very important because it helps you craft a stronger offer because you can craft that offer that day.

How do you get pre-approved? Well, there's a big, big, big difference between pre-approval and pre-qualified. So a lot of people say like, hey, I've been pre-qualified for X dollar amount. That's all great, but when you get pre-qualified, basically what a lender will do is they will take your word on everything that you say, and based on what you tell them, they will run some preliminary numbers and give you a ballpark idea of what they think you could qualify for in terms of a mortgage. When you talk about being pre-approved, you take it one step further. When you are pre-approved, now you're submitting paperwork and filling out a preapproval application, and now you're showing and improving to that lender what you're really worth and what your credit worthiness looks like when it comes to buying a house. These two things can be completely different numbers because now that they have a chance to look at your financials, they can make any adjustments that they need to make based on what they see on the paperwork.

First thing's first, you have to find a lender. My recommendation is to use my lender. Utilize me as a resource. So if you do not have a lender of your own, somebody that you know, like, and trust already lean on your real estate agent because they have partnerships with people that they do business with on a regular basis. They know if those individuals are good at their job, attentive, do a great job with communication, and they can figure out a way to get loans closed. So that's why I always say lean on your real estate agent for choosing your lender. Once you've chosen a lender, you're going to have to fill out that paperwork I was talking about. So loan applications and filling out all that stuff is going to be the next step of the preapproval process. Once you start filling that stuff out, the lender's also going to ask for all of your financial information.

This would include your pay stubs, your bank statements, tax returns, proof of employment, and then also your credit score. The higher your credit, typically, the more likely you are of being approved for your loan. To make sure that you're successful, I always encourage people, the moment you decide that you want to buy a house, you need to really take it very seriously when it comes to either boosting your credit score or if you have a really good credit score and it's really high, making sure that it stays that way. Couple things to keep in mind is as they're looking at your credit and all that other stuff for your financing, they are going to continue to check your credit throughout the process. So when you get under contract and you finalize your loan application and you are going through that process, they're going to run your credit just to make sure nothing's changed from your pre-approval.

Then I would not be surprised if they ran it probably another two or three times before you got to closing just to make sure that nothing changed with your debt to income ratios or that you didn't, I don't know, go out and buy a brand new car while you were under contract for a house. They're going to look at all that documentation and they're going to send that to their underwriting department, and they're going to see what you qualify for and come back and give you a pre-approval letter. That pre-approval letter will be used when we submit that offer. We're going to send that into the listing agent as well for the seller to see that, hey, we've went and talked to somebody and they said that they will give us a loan to buy this house, and that pre-approval letter will have the said dollar amount on it, and a lot of times it has things like your rate and what kind of loan it is, whether it's conventional, FHA, VA, USDA, whatever it is.

It will have all that in there, and also it will have contact information so that listing agent can also reach out to your loan officer to ask any questions that they may have about you as a potential buyer. So that is what we got when it comes to getting pre-approved. The next step in the process is going to be searching for your next home. Stay tuned to the next vide that's all about the search tools and techniques that'll be used in order to find your next home.

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