PREAPROVALS: Few people can buy a home for cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers finance their purchase, which means that virtually all buyers -- especially first-time purchasers -- require a loan.
The real issue with real estate financing is not getting a loan (virtually anyone willing to pay lofty interest rates can find a mortgage). Instead, the idea is to get the loan that's right for you -- the mortgage with the lowest cost and best terms.
We routinely suggest that our clients start the mortgage process well before making an offer on a home. By meeting with lenders -- either online or face to face -- and looking at loan options, they will find which programs best meet their needs and how much they can afford.
We also recommend preapprovals for another reason: The Colorado Contract To Buy and Sell Real Estate form requires buyers to apply for financing within a given time period, in many cases, seven to 10 days. By meeting with loan officers in advance and identifying mortgage programs, our clients avoid having to quickly find a lender, check credit, and rush into a financing decision that may not be the best option.
What is it? "Preapproval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a preapproval letter, which shows your borrowing power. You can visit as many lenders as you like and get several preapprovals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.
Although not a final loan commitment, the preapproval letter can be shown to listing brokers when making an offer on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
How do you get preapproval? Real estate financing is available from numerous sources. Based on our experience, we recommend our clients work with local Durango lenders who offer competitive programs and deliver promised rates and terms. We have several we highly recommend.
The lender will carefully review your financial situation, including your credit report and other information. They then will suggest programs which most-closely meet your needs. For instance, a first-time buyer may need to finance as much of the purchase price as possible, while a repeat purchaser (someone who has bought a home before) with more equity (money invested in the home) might want to get a 15-year loan and the lower overall interest costs it represents. Typically, first-time buyers opt for the traditional 30-year loan, with either a floating interest rate or a fixed rate of interest over the life of the loan. In most situations we prefer our clients select a fixed rate loan.
If we can assist you in locating a local lender, give us a call or email. We'll be glad to help.
No comments:
Post a Comment