This post is a continuation of a series, Overview of the Home Buying Process. You may also want to read my first post in the series about how to hire a REALTORⓇ. Today, I will be talking about getting pre-approved for a loan.

Why Get Pre-Approved?

Getting pre-approved for a loan is a very important step in the home buying process, and it should be completed PRIOR to looking for homes. Why is getting pre-approved for a loan important to you?

  1. You will know how much home you can afford.
  2. When you find a home you like, you will be prepared to present an offer. Most sellers want to see a pre-approval letter with offers.
  3. Your offer is strengthened by a pre-approval letter. That letter says to the seller “I’m ready and qualified to buy your home.”

Finding a Lender

How do you go about finding a lender? Talk to your REALTORⓇ. Your agent works with a lot of lenders, and they know which lenders are good at their job.

You want to make sure you have a lender that is informed about the different loan programs available to you. You also want a lender that is honest since they will be handling your financial information, and you want a responsive lender. Many terms in a home purchase contract are time sensitive. You want you lender to be mindful of those deadlines.  

Also, not all lenders have the loan programs that you will need for the property you want to purchase. A great example in the Murrells Inlet, SC area are condotel properties. These are properties that from the outside look and run like hotels but the rooms are condos and individually owned. These properties are most likely ocean front or near the ocean, are a resort and have resort-style amenities, have a front desk and most of the condos are used as investment properties. Most lenders cannot lend on these type of properties. You need to get the right lender if you are looking to buy a condotel property. Your REALTORⓇ can point you in the right direction.

Prior to Talking to a Lender

You can do a few things prior to talking to a lender that will make getting pre-approval for a loan a smoother process.

  1. Start saving for your down payment and closing costs.
  2. Pay your bills on-time.
  3. Gather your basic financial information. For example, know where you will be getting your down payment. Have you been saving for the down payment, will you be getting a gift from a family member or do you need a loan with no down payment? All of these situations require different types of loans.
  4. Know where you will be getting the money for your closing costs. Those funds could come through savings or you can ask the seller to pay for closing costs.
  5. Decide how much you would like to spend. You do not necessarily need to know that you want to buy a $400,000 home. Instead, let the lender know what you pay each month in rent or what you would be comfortable spending each month. Your lender will determine the amount of home you can afford based on your income, debts and credit score.

Apply for a Loan

When you meet with your lender, you will receive a loan application. Most loan applications can be completed online. They give the lender the information they need to pre-approve you for a loan. Complete that application thoroughly and completely.

Typically, your lender will need to know the following information…

  • your name
  • address
  • date of birth
  • social security number
  • income
  • income source (job, retirement, etc.)
  • down payment amount (if any)

You can also provide your lender with financial information including bank statements, pay stubs, tax returns, W2s/1099s, social security or retirement benefits, investment account statements, etc.

Questions You Should Ask Your Lender

  1. What is the closing time frame with my chosen loan?
  2. How much are the fees associated with my loan and who gets those fees?
  3. What is an estimate of the amount due at closing (i.e. closing costs)? Can I see a Loan Estimate?
  4. Who will I be speaking to or who can I call during the loan approval process? Some loan officers take the initial application and the day-to-day processing of the loan is handled by a team member. Other loan officers are more hands-on and they will be your contact.
  5. How will you communicate with me?

Getting a Pre-Approval Letter

Once you get the application back to your lender, it will take a few hours to a day for your information to be reviewed and a pre-approval letter written. There is no cost involved in talking with a lender and getting pre-approved for a loan. You will have a professional review your financial information and credit score, give you advice and an estimate of what you can afford, and have confidence to submit an offer on your dream home.

Your lender will also ask you which real estate agent you are using so they can forward your pre-approval letter to that agent.

After getting pre-approved for a loan, the next thing you need to do is meet with your real estate agent and go through a buyer consultation.   In my next blog post, I will talk in more detail about the buyer consultation.

Until then, you can contact me with any home buying (or home selling) questions. I can be reached by email at Kathy@TeamRukat.com or by phone/text at 843-267-2710. Start searching for your next home by visiting the Basic Search section of my website. Happy house hunting!!!