Category: Home Shopping Tips

Home Shopping Tips

Home Shopping Tips: You’re Preapproved! What Does That Mean?

Glenn LeachLeave a comment
Shopping for Homes

The first and obvious question is, What Is A Preapproval?  A preapproval basically means that I believe you can buy a home that is priced up to a certain amount.  The preapproval is based on your credit report and the information you have provided so far.  Your loan officer may not have all your information, and some of the information you provided may be wrong, so a preapproval is not a guarantee that your loan will actually end up being approved.  But a good loan officer can ask the right questions and be pretty sure how much you can afford. 

The preapproval is your ticket to start shopping for a home.  So, start shopping.  But while you’re doing that, you’ll be asked to provide proof that your application is correct and complete.  So, watch your email for lists of items needed for your file and paperwork for you to sign.  The sooner you complete your tasks, the sooner your loan officer can know for sure that the preapproval is justified.

Once your items are provided, they will be reviewed by the loan officer and the processing team.  The processing team will do the behind-the-scenes verification stuff just to make extra sure we’re ready to go.  Your loan team doesn’t need to wait for you to find a property to do all this verification.  But once you find your property, the underwriter is the ultimate judge of your file, and your loan team will want a nice complete file before going to underwriting. Don’t delay doing your part and getting your items submitted because once you have a home under contract, strict deadlines start to apply. That means your file needs to get submitted to underwriting quickly at that point, and a file with too many missing items will give a bad first impression to the underwriter and make your file tougher.  Once the underwriter is satisfied that your file is worthy and the appraisal comes in good, you’re ready to close.  Getting things in order sooner allows your file to be ready to close sooner and takes much of the stress out of the process for you.

Since the current market is so competitive, it’s nice when you can tell potential sellers that your credit application is complete and it’s ready to go to underwriting right away.  That is much stronger than just having a preapproval letter – and listing agents do call loan officers all the time when they are considering your offer.  I don’t blame them because frankly, many preapproval letters aren’t worth much when they are done by lenders who don’t know what they are doing – and there are a lot of lenders who don’t know what they are doing.  I used to be a lender who didn’t know what I was doing too!

Many years ago, my first boss told me, “Just tell them they are approved!  Hopefully you can get the loan done and get paid.  But if you can’t, you just deny them and move on.”  That’s really how he operated.  Sad, but true.  I prefer to make sure you’re good to go before you find a home! 

There are a lot of shoppers trying to buy the same home that you are looking at.  Anything you can do to make your offer stronger you should to do.  So, get your documents in quick and you can be confident your loan will actually get approved and close! 

Home Shopping Tips

Home Shopping Tips: How Long Are Preapprovals Good For?

Glenn LeachLeave a comment
Calendar

You’ve been preapproved to go shopping, but just how long is your preapproval good for?  The short answer is, “Until your situation changes”.  Okay… But what does that really mean? It means that if you’re good to go today, then you’re good to go once you find a home if there are no changes to your application file.

Things that can change along the way are things related to Credit, Income, Employment, Assets, Liabilities, and Family Situation. Let’s start with Credit: You forgot to pay a credit card bill on time, and they reported you late to the credit bureaus. That could tank your credit score so you may not qualify anymore, or you may only qualify at a higher interest rate. That would be a “situation changes” sort of thing. Another classic case is where you pull up to the final walk-through of the home you’re trying to buy in your BRAND-NEW CAR! That new car loan debt could change your credit situation so you no longer qualify. Many buyers don’t realize that your mortgage lender gets notified if someone pulls your credit – so we’ll see it and have to find out what happened.

Income and Employment changes can impact your situation as well. If you get a nice job offer while you’re shopping for a home, should you take it? If your car breaks down and you need another one, should you buy one? Some lenders and helpful real estate agents will tell you that you can’t do ANYTHING until your loan closes, and that isn’t true. My best advice is, BEFORE you do anything like add more debt or switch jobs, ASK YOUR LOAN OFFICER BEFORE YOU DO IT! We are not here to catch you doing something bad or prevent you from living your life! We’re here to help! So, we can get the facts and see if that “situation change” will impact your preapproval or not.

Another classic problem is changes is assets. If you’re planning on using some of your own money for the loan, changes in assets can create problems.  Obviously, if you spent your down payment that you were planning to use and we based your preapproval on you having that money, that’s something you should let us know.  But the #1 problem we have with assets is when WE CAN’T VERIFY WHERE YOUR MONEY CAME FROM.  Mysterious deposits that show up in your bank accounts that we can’t prove what they are?  Big problem.  Maybe your parents get excited about your purchase and surprise you with a gift to help with the costs.  HOLD ON THERE!!!  Before you do ANYTHING with that money – talk to your loan officer!  With the Federal Government’s “Patriot Act” rules to combat terrorism and money laundering, we have to account for any and all money used in a mortgage loan. It may or may not be a problem for your file, but please find out before you do anything with surprise money. I could tell you horror stories about this one…

I mentioned “Family Situation”. That one sounds weird, so what are some file land mines with “Family Situation”. A common one is getting married during the home shopping process. I’m a romantic at heart and I love a good wedding, but in some cases – especially in what are known as “Community Property States” – uniting with your sweetheart in marriage can mean you are marrying his/her debts and credit scores (a bit complicated to explain all the possibilities here). On the other hand, marrying may actually improve your purchasing power too. So, like with other things, check with your loan officer before you walk down the aisle together.

One other “Family Situation” has to do with childcare or child support payments. These may be considered “debts” for your file, and we won’t see these on your credit report, but during the file processing, we will very likely uncover these things. If you have these obligations – paying for childcare or paying child support – please bring it up early so we can make sure the file doesn’t blow up during the process.


Home Shopping Tips

Home Shopping Tips: The Rewards of Service

Glenn LeachLeave a comment

Pound for pound, a Roman “Legionaries” was the most capable, best equipped, and best trained fighting machine that existed during Rome’s over 1,000 year period of world domination.  When not at war, a Legionaries was training for war, practicing hand to hand combat, use of various weapons, general fitness and swimming, and battle strategies.  A typical day while in the field included covering 20 miles at a fast pace while carrying full battle armaments, and then building a fully protected camp complete with encircling trenches and wooden staked fortifications before resting for the night, only to get up the next day to do it all again.

Unlike other armies who relied on conscripted soldiers who were enlisted when needed, a Legionaries term of service was 20 – 25 years.  That length of service, with constant training, allowed the Roman army to easily vanquish foes even when they were vastly outnumbered on the battlefield.  Just how did Rome convince these Legionaries to remain loyal and dedicated during that length of service back when life expectancy was less than 50 years?  The biggest incentive for fulfilling your full term of service was the promise of FREE LAND when your service was complete. 

That piece of land was well worth the cost and hardships of service.  Landownership provided freedom and status and respect.  It still does today!  Although service in the US military doesn’t qualify you for free land when you’re done, when you consider that you have the right to buy a home while you’re still serving and part of your pay (BAH) helps you pay for that home while you serve and you get to use the amazing VA Home Loan Benefit to buy your home, our system today seems actually better to me.  But it’s only better if you act and take advantage of the opportunity!

Shopping for a home can be tough. There are lots of buyers fighting over not enough homes, and you’re not going to win every bid you submit. But remember what you are fighting for: Freedom, status, respect, the ability to take care of your family, and the promise of a better tomorrow. The fight is worth it and the rewards are great.

You defended it.  Now own a piece of it!