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 -- required a
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. That's why we suggest
that consumers start the mortgage process well before bidding on a
We also recommend pre-approvals for another reason: Purchase forms often require 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, it won't be necessary to quickly find a lender,
check credit, and rush into a financing decision that may not be the
What is a Pre-approval?
"Pre-approval" 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 pre
approval letter, which shows your borrowing power. You can visit as
many lenders as you like and get several pre-approvals, 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 pre approval letter can be shown to listing brokers
when bidding 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 pre-approval?
Real estate financing is available from numerous sources. Click Here
to see some of our preferred lenders.
The loan officer from the bank will
carefully review your financial situation, including your credit report
and other information. The lender will then suggest programs which
most-closely meet your needs. For instance, a first-time buyer may
qualify for state-backed mortgage programs with little money down and
low interest rates, 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.