This is the first article in a serious of articles that walks you through the buying process. I am so happy for you that you’re taking this first step! Buying a home is a major decision. Being an informed buyer makes that decision a lot easier.
The first and most important step in your home buying process is getting a pre-approval. Pre-approval starts by meeting a lender and discussing your needs. The lender then will ask you to fill out an application. She will also ask you to submit some documentation, like tax returns and W2s . Other documents maybe required, and your lender will walk you through that process. Your lender will then run a credit inquiry for you and will provide you the amount you are pre-approved for. Now you’re ready to start shopping for your home and make offers. Offers are Purchase Agreements your agent prepares. A pre-approval letter is included in the Purchase Agreement.
Here are the 5 reasons pre-approval makes you a strong buyer:
Become a Credible Buyer
Having pre-approval at hand tells sellers and their agents you are a qualified buyer. This means offers you extend are credible. Credibility means, your offer is considered more seriously. Sellers and agents are more likely to work with you than those who lack pre-approval. Buying contracts with pre-approvals are often the only ones considered by sellers.
Know How Much Home You Can Afford
Pre-approval lets you know home much you can spend on your new home. Your income and existing debts are considered when determining your purchase power. Knowing your purchase power makes you an informed buyer. It also allows you to stay within your means, and not overextend yourself.
Boost Your Confidence
Getting a pre-approval looks like a routine process. But, having that piece of paper at hand is a huge confidence booster. You have spent many years preparing to buy a home. You have saved money, and you think you are ready to buy. Now, someone else is telling ‘YES YOU ARE!’ It’s one of the small rewards of many on the path of buying your home!
Know How Much Money You Need at Closing
This is another great benefit of getting pre-approved. You are weeks, if not months, away from closing on your home. And you have learned exactly how much you’ll need to bring to closing. This gives you plenty of time to get the money. Some buyers get a gift from family members to buy their first home. Others use Ekub or Susu to finance their first home. Knowing how much you need during pre-approval prepares you get the money together.
Improve Your Pre-Approval
Your first pre-approval doesn’t have to be your final one. At the time of your pre-approval, your lender will tell you what you can do to improve your pre-approval. One of the things you can do to improve your pre-approval is to pay down your debts. Paying down your debts improves your credit score. It also improves your debt-to-income ratio. Both of these things can potentially increase your pre-approval amount.
I will tell you more about what impacts your credit score in the next post.
I hope this post was informative to you and has left you with a desire to learn more. Next, we’ll learn about all the things that impact your credit score.