When to Get Pre-Approved - Before or After You Find an Ulster County Home for Sale?
by Dylan Taft
on Friday, February 17th, 2012 at 3:07pm.
When buying real estate for sale in Ulster County, NY, one of the most crucial phases is securing the financing and getting pre-qualified. If a buyer is going to make a formal offer on a home, it is usually customary for the purchaser to submit a pre-approval letter, which is provided by a lender, and is an assurance to the seller that the buyer can afford the home; thus making it a stronger, more reliable offer. Sometimes buyers aren't aware that securing the financing is actually one of the first steps to take when starting a home search. I makes perfect sense however, that buyers should really know their budget before viewing properties; and it is only fair to the seller (and the buyer's agent for that matter!) that buyers view (and potentially make offers on) properties that they are certain are within their budget and affordable. At Taft Street Realty, we make sure all of our buyers are pre-qualified before viewing homes.
A Basic Look at Getting "Pre-Qualified"
If the buyer is making an all-cash offer, a bank statement reflecting proof of funds is usually adequate. More commonly however, buyers will need to secure financing in the form of a home mortgage. Getting pre-qualified or "pre-approved" is a formal, step-by-step process between the buyer and a lending institution. Being pre-approved does not require a buyer to formally commit to any one property, nor does it bind a buyer to that lender. It is essentially written proof that the buyer can afford the home under certain terms.
Why YOU Should Get Pre-Qualified
When it comes time to actually make a move on a house and make an offer in writing, the buyer should shop around for the best loan program and interest rate. But before house hunting even, it is smart if a purchaser gets pre-qualified first, so that their buyer's agent feels comfortable, but more importantly, so that the buyer truly understands what they can realistically afford. Many buyers often search in a price range they "think" they are in. But when you factor in things like insurance, taxes, and a down payment, potential buyers are often shocked at how their monthly payment translates into a purchase price and vice versa. So it is very important for a buyer to contact at least one lending institution in the beginning so they can: 1) get any initial questions answered, and 2) get a solid idea of what payment they can afford and what price range to begin looking in.
Lenders typically examine a buyer's last 2 years of financial activity to make their calculations. A Taft Street Realty, we let buyers know that they need to have at least 2 years of steady, taxable income in order for banks to consider them for a loan. If buyers are not self-employed, they should have their W-2 forms from the last 2 years, and their last 2 paystubs. If buyers are self-employed, they must bring their Federal tax returns from the past 2 years, as well as the last 2 years' tax returns for any partnership or corporation in which they own 25% or more.
Proof of Funds Via Bank Statements - Lenders will require bank statements from the past 2 months to serve as further proof of funds. Greg Eckert tells buyers that they must be prepared to explain and source any recent large deposits.
Identify Yourself! (as well as any other applicants) - Proper Identification of all sorts is needed when getting pre-qualified. This goes for all applicants for the pre-qual (a husband and wife who want both of their names attached to the loan for example, should each bring their own set of identification) Lenders will require: Your full legal name, physical addresses for the past 2 years, date of birth, and social security numbers. Passports, ID's, utility bills, social security cards, etc. (If you're not sure, we'd recommend you bring it just in case)
Getting By With a Little Help From Your Friends? (or in this case, Relatives) - It is not uncommon for buyers to receive some "gift" money from say, a parent or a relative in order to help out with the purchase of a home. If buyers are planning on obtaining what are called "gift funds", Greg Eckert suggests they find out a fairly accurate estimate of how much, and mention that when getting pre-qualified, because the lender will take this into account.
Be Clear About Your "Comfort Zone" - Greg recommends that buyers have a clear idea of what is a realistic mortgage payment for them. They should tell their lender what number, if they go over, will put them out of their "comfort zone". A lender will also take this into consideration and work with the borrower if they have an idea of the borrower's budget.
Current Mortgage Options May Surprise You (in a good way!!!)
Since the mortgage meltdown and housing crisis began in 2007-2008, lending guidelines have changed and getting a mortgage is much harder than it was prior to the recession. Difficult yes, but not impossible. Today, many buyers hear in the news that 20% down is now the standard, along with many other headlines relating to the real estate and mortgage industry. What many buyers do not know, and just another reason to get qualified early on, is that there are great loan programs out there where the payment is much less than 20%. Some programs offer 100% financing while others require just 3.5% down. So buyers do have options, and as long as the buyer's debt and income / assets are in line with what's required, then financing a home purchase is definitely possible.
Local Experts With Established Experience
Founded in 1851, Ulster Savings Bank has the distinction of being the first savings bank in Ulster County, NY's history. In 2012, Ulster Savings Bank remains very healthy with a high net worth, strong capital, and high-quality assets. Being locally owned and operated with locations throughout the Hudson Valley, Ulster Savings has a strong connection to the community it serves. Taft Street Realty has had the pleasure of working with Greg Eckert and Ulster Savings on numerous real estate transactions over the years!
No Better Time to Get Pre-Qualified!
Right now remains one of the best times to buy real estate in recent U.S. history. Interest rates are at record lows, and the housing market is overloaded with beautiful and extremely affordable homes. With interest rates and current inventory the way they are, we here at Taft Street Realty tell pre-qualified buyers that there may not be a more ideal climate than now to purchase their piece of the American Dream!