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Why pre approval matters

There are certain things that have to fall in place before you can buy a home:

  • Have enough for a down payment and all closing costs
  • Know what closing costs are
  • Clean up your credit score by clearing old debts and stop applying for other lines of credit
  • Figure out how much you can realistically afford
  • Know what you want in a home and what you can do without

But the most important thing to do is get preapproved for a mortgage, if needed. If, as a buyer, you don’t need a mortgage and are paying in cash, you are a rare breed and can log in to Facebook now. You don’t need to read this.

A pre-approval is a commitment in writing from a lender that a borrower would qualify for a particular loan amount based on income and credit information. Most pre-approval letters are good for 60 to 90 days.

A buyers’ chances of purchasing a home improve greatly when you have your financing in place before you walk through the first house.

It help you know what your limits are financially so you don’t spend six months looking at homes that are  out of your league. That is a waste of your agent’s and your time. Plus, you don’t want to fall in love with a house you can’t afford.

When it comes to writing an offer, having pre-approval is great. It is a good argument for why the sellers should accept your offer. It shows the buyer is committed to buying a house, can afford the price they are agreeing to and things won’t fall apart at the last minute because of financing.

Or, if you find a house you love and then have to go take time to get pre-approved, another buyer can swoop in and snipe that house.

Sad, but I’ve seen it happen.

Getting pre-approved isn’t as simple as filling out a profile on Facebook. The process for preapproval is a bit more extensive than in the past. You first have to contact a lender and will need to have a variety of documents, ranging from W2s from the past two years, paystubs for past three months, tax returns from past two years, savings and checking account bank statements as well as landlord or previous mortgage information. Contacting a lender before you start house hunting gives you ample time to get all of these together, so you don’t have to rush and stress out later in the process.

The lender will analyze your credit report for any red flags such as late or missed payments or charged off debt. Your credit score will affect your ability to qualify for a loan and determine how low of a rate you can get. Your overall debt (minimum credit card payments, student loan payments, car payments, etc.) will be analyzed to calculate your overall debt-to-income ratio. You will also need to provide any alimony or child support payments you are required to pay.

A lender can also answer questions of the ins and outs of mortgages.

If you have any questions about pre-approval or the process of purchasing a home, ask us!

La Crosse Fine Homes Group of Keller Williams Realty

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