Pre Approved Home Loan
 

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Getting preapproved for a home loan mortgage can help you when looking for your house.
Here is why:

 
1. By getting preapproved for a loan, you will be able to find out how much you will qualify for and be able to borrow.

2. By knowing how much you can borrow you won't waste your time looking for a house that is out of your price range. (see note 1)

3. By getting preapproved, you'll also get a good-faith estimate of your closing costs, so you won't be surprised by those expenses later on.

4. When you get preapproved for a loan you will be introduced to the loan application process. You will find out the different types of loans that are available and a good idea of what the interest rate will be on the loan. Some lenders will let you lock in your interest rate in for a set number of days. By knowing the interest rate you will be able to calculate your monthly payments.

5. You will get a Preapproval Letter from the lender. A Preapproval letter will usually state the amount you can afford and spend on a home. Having a Preapproval Letter lets the seller know that you are serious and that you can afford their house. Some real estate agents won't even show you houses until you have this Preapproval Letter. I also know some For Sale By Owners that won't let you into their house unless you can produce a Pre Approval Letter for a loan in their house price range. This letter keeps everybody from wasting their time only to find that you cannot afford a house that and accepted offer has come back on. A preapproval Letter might even improve the odds that the seller will accept your lower offer. 

How to get prequalified and preapproved for a loan.
 
To get prequalified for a home loan, you'll need to answer some basic questions about your financial situation. Lenders today will want to review your income, debts and credit score, and they'll expect documentation that shows your income and assets.  Your paycheck stubs, bank statements and other documents may be needed at time of preapproval. Be aware that prequalified and preapproved are preliminary; your loan will still need to receive final approval before you can buy your home.

 

What can happen if I do not lock in the interest rate and it goes up?
 
If you have not locked in your interest rates and they go up by .5% that could mean an extra $100 or more a month you will have to pay on your loan. In some cases this may mean the difference of you qualifying for the original pre approved prequalified loan. Ask the loan officer what the banks or mortgage companies policy is on this.

(Note: 1)
Price of house out of your price range.
1. Make an offer on the higher then you can afford house at the price you are approved for.
Many times a seller will take 5% to 10% less then they are asking. Some sellers in a pinch may take an offer even 30% less then your asking price.

People going thru a divorce sometimes take a lot less for their house just to settle the estate.

People that are airs to a house of a family member sometimes sell the house for less.

Out of state owners sometimes take a lot less for a house then it is worth. I know of a person that purchased a commercial building for $50,000 when the asking price was $100,000. The person owning the building passed away and left it to 7 children that all lived out of state. The building was on the market for six months and then one of the children came down with an a terminal illness.  All the children agreed to sell the property for $50,000. This building was purchased in 1990 for $50,000 and sold in 2005 for $280,000. The building was rented out for $1,200 a month during the years 1990 to 2005. Add it up, big profits were made. (This is not typical but it does happen, especially when you purchase in a down market and sell in a up market.)

(Note: 2)
2. The seller knows that you have been approved for a $125,000 loan and their house is priced at $135,000. The sellers may accept your $125,000 offer knowing that you cannot borrow any more then that.

 



 

 

Note: I am not a real estate agent or broker. I am not a bank or mortgage company employee.
All information is from my own personal experiences over my 25 years of buying and selling my own personal properties.
Always consult a professional in the field of finance and real estate. In other words I can't promise you that everything posted here is accurate.
Its been a wild ride!