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The Pre-Approval Process

April 03, 2008  |  Difficulty: Easy

Path to mortage
This point just can’t be reiterated enough. The first steps in home buying are research and then the pre-approval. There is an overwhelming desire to look for the house first, but this can leave you feeling down. You may find that dream house, only to realize that it is completely out of your budget. When you go through the pre-approval process, you will then know the dollar figure you are working with, and can look for houses within your range.

It is likely that you will be pre-approved for a mortgage amount that is excessive, meaning you don’t need that much money. If you take on a loan that is drastically more than your yearly income, you are setting yourself up for trouble. Put yourself in a position where you will most likely prosper, not fail. You should calculate the amount you will be able to finance each month and then stick with that figure. You don’t have to take what you are given. If you need to downsize, do so.

The pre-approval process can be truly enlightening. You will be able to see your credit score, and assess how that credit score will affect your interest rates. You should deal with professionals who understand credit scores, mortgage funding and debt-to-income ratios. Getting help from a professional will help you understand this process a little better.  A professional will also clue you in on the type of interest rates that correspond with your credit scores and the type of mortgage you can expect to get. The information you get from a professional can be as extensive as how much you will need for your down payment and for your closing costs. 

It seems like a weighty task, but the work you put up with in the present, will save you a lot of trouble and frustration in the future.

If you take the time to determine your financing before looking for a house, you may find that you can qualify for special programs. Most special programs will save you money, and will allow you to finance great homes that you may have never dreamed of living in! A great credit score can qualify you for down-payment assistance programs, and even programs through the FHA that will require no down payment at all. That said, you should be aware that sometimes a lower down payment means a higher interest rate.

The worst case scenario is finding the home of your dreams, but being completely unprepared to finance it, so the offer goes to someone who is better prepared than you are! Do not let this happen to you.

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