Buying a house is exciting—but it’s also stressful. Our mantra for our clients is simple: Take all the guesswork out of what you’re doing and it’ll become easier and more enjoyable.
So where do you start when you’re shopping for a home, whether it’s your first, second, or tenth?
You get a lender to preapprove you for a mortgage.
Why You Need a Mortgage Preapproval to Buy a Home
Unless you’re buying a house in Lakewood, Long Beach, or one of the area’s other communities with cash, you’re going to need to work with a lender. While it’s up to you to find out how much house you can realistically afford, your lender will let you know how much money they’re willing to give you when you go through the loan preapproval process.
What is Loan Preapproval?
Loan preapproval is the process you go through when you give the lender your financial information, which can include income tax returns, pay stubs, and proof of other sources of income.
Your lender will look at all the information and evaluate your credit report to determine whether you’re low, medium, or high-risk, and they’ll decide whether they’re willing to give you the money to purchase a home if your financial circumstances stay the same.
What’s Loan Prequalification?
Loan prequalification is not the same thing as loan preapproval. A prequalification is based on information you provide the lender without giving them the ability to verify it.
Your loan officer may ask you how much you make in a month, and then they’ll take your word for it when they prequalify you; a loan officer may say something like, “This isn’t a formal approval for a loan, but based on what you’ve told me, you could be approved for a $450,000 mortgage loan.” You’ll still have to provide documentation that backs up your claim if you want the lender to approve you for a loan in any amount.
Some major lenders don’t even provide prequalification. They want you to prove your income, show how much you’ve paid in taxes, and provide documentation that gives them a clear picture of your financial situation.
What Preapproval Can Help You Do
When you have a preapproval letter from a lender, it serves two purposes.
One, it tells you what your budget looks like for a home. If the lender will approve you for $450,000 based on your current financial circumstances, for example, you’ll know that you should be looking at homes for sale in Long Beach listed between $400,000 and $500,000.
The second purpose of a preapproval letter is to show sellers you’re a serious buyer. Plenty of people schedule tours in homes they’re not going to buy, and some people even make offers without having preapproval letters from a lender.
When you make an offer and you can show the seller that your lender is ready to seal the deal, that provides the seller with incentive to choose your offer over others without preapproval letters.
Are You Looking for Homes for Sale in Lakewood or Long Beach?
We’d love to help you find your dream home in Lakewood, Long Beach, or any of the surrounding communities. Call our expert Lakewood real estate agents at 562-882-1581 today to tell us what you’re looking for so we can help you find your way home.
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