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Mortgage application formThis is next post in my series discussing what first time home buyers should know about the real estate process from start to finish. My previous post provided an overview of topics that I will be covering in more detail over the next several weeks. Acquiring a pre approval letter is the first step in a serious search to buy a home in Dayton, Ohio or elsewhere. It provides both your real estate agent and potential sellers a level of assurance that you can afford to purchase the homes you are showing interest in. Sellers may deny an offer unless a buyer can provide a pre approval letter within a very short amount of time, or my outright accept another buyer’s offer if a pre approval is not immediately available. Many agents may ask a potential buyer to secure a pre approval letter before they invest time in showing the buyer houses. However, buyers may be overwhelmed and confused when it comes to the process.

In order to get pre approved to buy a home, many aspects of your financial situation will be considered. You will be asked to show proof of income through pay stubs, your amount of savings, any other assets you may have, and your credit score will be evaluated. The potential lender will pre approve you to make an offer on a home up to a certain amount, based on the information you provided. The more attractive your financial profile is, the more money you will be approved to borrow. This provides the buyer and the buyer’s agent a guideline for what price range of houses the buyer may make an offer on. A potential buyer may be denied a pre approval for a number of reasons, including a low credit score, too much debt when compared to the buyer’s income, recently switching jobs, having a recent bankruptcy on their record, or having a small business that is less than two years old. If you are denied a pre approval, your loan officer may be able to provide advice on what is needed to improve your chances of finding a credible lender.

There are many options for obtaining a pre approval letter. Online services such as Rocketmortgage, allow potential borrowers to find out if they are approved or not in a very short period of time. They achieve this level of speediness by accessing your bank records and financial information in real time. If you wish to apply with a local lender face to face, there are plenty of options. Credit Unions and other banking institutions may have special interest rates or deals for members. A quick Google search of “Dayton mortgage lenders” brings up a number of institutions that provide mortgage loans. And many real estate agents – and associated companies- have a relationship with a specific lending institution and can provide you with a recommendation. For example, my company Keller Williams, works with the lending institution Primelending, and ensures that Primelending representatives are available to answer first time buyer questions. Working with the lender associated with your real estate agent may help to streamline the process, but is in way required.

Whoever you choose to get pre approved with, remember that you are not obligated to continue with your loan once pre approved. As you begin your housing search, you have the right to shop different financial institution for a better interest rate. Most lending institutions will have very similar standards for lending, as well as similar rates. If a rate offered seems too good to be true, be leery and make sure that you read the fine print. It is best to find a balance between considering two or three different lenders, and not taking too long to make a final decision. Once you make an offer on a home, you will have a limited time to close the deal, and will need to begin the mortgage process immediately. This process can be arduous and drag on, so having your lender decided on early can help ensure that your deal does not fall through.

And finally, remember that there is a wide difference between the amount your are pre approved to spend, and the amount you are willing to spend. Your lending institution is not taking the nuances of your lifestyle into account; only your accumulated savings and monthly income. How much a family wishes to spend on their house should be carefully considered according their priorities and spending habits. The higher your monthly mortgage the more it may cut into other luxuries, such as dining in restaurants, monthly clothing budgets, furniture for the new home, decor budget etc. Before making an offer on a Dayton area home, ask your lender or real estate agent to help you calculate what your total monthly mortgage bill will be, including estimated insurance, interest, and principal. Once you know how much you are able to spend, and the amount that fits into your personal budget, you are ready to make a serious offer on a home.

Contact me today to speak with a realtor. I also service Beavercreek, Centerville, Cincinnati, Clayton, Englewood, Oakwood, Fairborn, Harrison Township, Huber Heights, Kettering, Miami Township, Miamisburg, Riverside, Springboro, Trotwood, Vandalia, Washington Township, West Carrollton, and Xenia.