Getting Preapproved

In the last year, 87% of buyers financed their home purchase. First-time buyers who financed their home typically financed 93% of their home, and repeat buyers financed 83%.2 If you will need a loan to purchase your next property, the most important step you can take is to get preapproved.

Getting preapproved gives you clarity on how much you can afford, which makes it crucial to do before you start your home search. You've estimated your buying power already in this guide; a preapproval is concrete proof of that number. Knowing it will ensure that you don't accidentally fall in love with a home outside your budget.

In addition, having a preapproval letter proves to sellers that you are serious about buying and that you will be able to make good on your offer. This is an important competitive advantage in tight markets like ours. You don't want to lose out on the home of your dreams just because someone else had all their ducks in a row and you didn't.

 

Preapproval vs. Prequalification

The two terms are often confused because they are so similar. But in reality, they are very different and it's important that you understand the distinction.

• Prequalification — An estimate of how much you could qualify to borrow. It doesn’t entail a credit check or official documentation.

• Preapproval — Proof of your buying power. It requires a full loan application, a credit check, and documentation regarding your income and assets.

 

Loan Application Rules

Your mortgage loan isn't guaranteed until the final paperwork is signed. To ensure a smooth loan application process, and prevent any wrenches from getting thrown into your homebuying plans, follow these ten rules.

• RULE #1: Do not change jobs, become self-employed or quit your job.

• RULE #2: Do not buy a car, truck, or van (or you may be living in it)!

• RULE #3: Do not use charge cards excessively or let your accounts fall behind.

• RULE #4: Do not spend money you have set aside for closing.

• RULE #5: Do not omit debts or liabilities from your loan application.

• RULE #6: Do not buy furniture.

• RULE #7: Do not originate any inquiries into your credit.

• RULE #8: Do not make large deposits without first checking with your loan officer.

• RULE #9: Do not change bank accounts.

• RULE #10: Do not cosign a loan for anyone.