When Buying a Home What Is the First Step?
If you are asking this question, you are likely getting more serious about home ownership. Maybe you are tired of renting or you want an upgrade. You want something that allows you to gain equity and be more stable financially.
If you have not been through the home-buying process before, it’s hard to know where to start. The very first thing you need to do is secure financing.
Secure Financing
Unless you are financially lucky enough to pay outright for a home, you will need to take out a loan. The first thing you will need to do is figure out how you are going to finance a loan. The most common method is in the form of a mortgage from a loan company or bank.
The first part of financing is getting your pre-approval letter.
You will give the lender some paperwork, like current pay stubs, bank statements, W2s, and permission for the lender to pull your credit. After, you will get a letter that states your maximum purchase price. Now you can start touring homes and when you find one you love, you can make an offer.
The pre-approval process is not the exciting part. It is, however, the very first step you must take. You don’t want to start looking at a certain price range to later find out you can’t afford it. It’s better to look at houses that are within realistic expectations.
How Long Does the Pre-approval Process Take?
How long it takes for you to get your pre-approval will vary depending on your lender. Some buyers can get their pre-approval letter the same day. If you have decent credit, straightforward W2 income, and funding in the bank, you could potentially be house hunting the same day.
It is often common for it to take days or weeks. Some factors are trickier to navigate, like being self-employed or having bad credit. Your lender may require more documentation up front in these situations. They may submit your full file for manual approval from the bank’s underwriters before they issue your letter.
The lender doesn’t want to give you the letter and later on in the home-buying process find out you don’t qualify due to an issue they did not find. This is why it is better to know in the beginning what you can afford, so you won’t have a surprise later.
What Do I Need to Do to Request a Pre-approval?
You can talk to any lender and request a pre-approval. This can include applying online, over the phone, in person, or at a bank or mortgage company.
It can be intimidating to choose a mortgage company. You also don’t have to use the same lender that you get the pre-approval from when you take out the home loan. This is great because you are not stuck with the company that gave you your pre-approval, maybe you found a different lender with a better rate later on.
For the pre-approval, the lender will ask you for some basic information. This conversation can take around 20 minutes depending on if you ask questions. If you don’t have any issues like bad credit or self-employment, you could have a pre-approval mailed to you that day.
The best thing is that most lenders do not charge you for a pre-approval. If they do happen to charge, it’s typically around $30 and that is for pulling your credit report. The pre-approval letter is a very important piece of paper so it can be shocking to find out that it typically doesn’t take a long time to get.
What Happens After I’m Pre-approved?
Once you get pre-approved you will know how much you qualify for. You can now start looking at homes in the specified price range and start narrowing down your search. Once you find a house you love, since you have the approval letter, you can put in an offer.
