What can a home buyer do before a pre-approval letter can be written?
To set the stage for our home buyer; they are not quite able to get a pre-approval letter from a mortgage broker or lender. They may need some credit repair to qualify or proof of down payment funds. But they feel they will get approval for the loan once these issues are addressed.
There are many things that can be done and many things that should not be done. Taking the time to learn the real estate market during this time is extremely valuable. Learn if your local market is in a seller’s market or buyer’s market. Sacramento right now for example is in a seller’s market. What does that mean for the price of homes? How does that impact selection?
One important action is to work with a real estate agent who can act as your buyer’s agent. The real estate buyer’s agent will work with you personally. They will understand your wants and needs and can target a list of homes that come up for sale in your desired area. The key is to look at the list to get information about price and style section. Not the house you want to buy. Problem number one when looking for a home before you can get a pre-approval letter in a seller’s market is that a contingent offer are rarely accepted. You may fall in love with a home you can’t buy and that is very discouraging.
Discouragement is the number 2 reason why people in the situation of waiting for a pre-approval letter to buy a home give up. Managing your expectation is an important skill in this process. Look at the list of homes as data in a decision not as choosing one of them to buy. Don’t do a lot of walking through homes at that time. It is easy to view you and your family living there. Bringing small children to look at the home can be hard. They do not understand these issues and can create some family drama that is very emotional.
Another very important activity is working with your mortgage expert and executing the steps the lender or credit agency needs done. A weekly contact is the minimal contact. Sometimes you have to take the step and reach out to them. Most loan broker’s and banker’s worlds are very hectic. They deal with many clients, technical issues, underwriter demands and the list goes on and on. They do not always follow up because they can be overrun with details. Make the effort to stay in contact. Ask, “What do we need to now?”
Home financing is not an easy subject. Most people feel like they understand it. But they are wrong. Next time you see a building with a lender’s name on it ask what are all those people doing in there? It is almost overwhelming the work and details that go into a home loan. Before the process went digital, it was not uncommon for a loan file to be six or eight inches of paper. The file is routinely the hundreds of pages. And the underwriter knows if one page is missing and the whole process is stopped by the smallest detail.
If you come away from reading this with this one understanding, it would have been worth your time reading. The smallest detail can derail your ability to get a mortgage. That is why working with a quality mortgage broker is key to successfully getting your loan approved. Do not fight the request for information. Underwriters are looking for both a reason to make the loan and reasons not to make the loan. The absence of information is viewed as a no loan.
One last detail; the number one reason why people don’t buy a home in this situation is that they do not get the pre-approval letter. Sometimes they do not do the work needed to get the loan. Many times their situation does not improve and they just can’t get qualified. Or the down payment money and other money needed to close the deal just doesn’t happen. If that happens, then don’t view it as a waste of time but valuable knowledge and experience gained. It will be very helpful when you try again to buy your dream home. Keep your dreams alive and persevere to your goals. I believe you can do it if you act with informed actions to reach your goal.