When and How to Apply for Your Alexandria Home Loan
Posted by David Zadareky on Friday, July 8th, 2011 at 1:42pm.
When buying a home in Alexandria, many buyers wonder which comes first - house hunting or loan shopping. Applying for a mortgage, no matter how it is presented, is a lengthy, detailed process. Some buyers prefer to postpone it until they find their house, but this isn’t always the best decision.
Here in the D.C. and Alexandria housing market, some buyers have found more bargaining power if they’ve been preapproved for a loan. Sellers in a hurry to close a deal may be less inclined to deal with someone who is at the beginning of the loan process. Their logic: “Why should I take your offer if you don't even know if you will be approved?” A seller's nightmare is taking the house off the market and losing other prospects only to find the buyer that made the offer cannot get a loan.
Though not a finalized loan, preapproval is a good idea. You go through most of the loan process and the bank agrees to loan you up to a stated amount. In other words, they have decided you are a good credit risk. You can go shopping with the understanding that they must now approve the house as a good risk.
It is rare but possible to be preapproved for a loan only to be told by the bank that the property does not meet their standards. In this case you would have to either find another property that is acceptable to the lender (and you) or find a lender that approves of the property. Don't be heart broken. If the house is a big risk for the lender, it's probably a bad investment for you. A good Realtor® can help you recognize and avoid these red flags.
Knowing that the loan process can be intimidating, many companies offer “prequalification in minutes” with a phone call or an online site. Prequalification and preapproval are not the same. If a buyer is prequalified up to $150,000, it merely shows the maximum the loan would be, if and when, they decide to loan you the money.
Loans are not quick. Expect lots of paperwork. Expect your financial history to be carefully studied and evaluated. Loans are not as freely granted as in past years. It is harder for those with bad credit, but not hopeless.
Brandon Cornett at the Home Buying Institute explains, “You will probably need a FICO credit score of 640 or higher to qualify for a home loan in the current market. If your score falls below that range, the FHA program might be your only option.” Major blemishes on your credit report should be resolved well before applying for a loan. Your Realtor® can point out credit roadblocks.
When you apply for the loan, be it preapproval or after house hunting, you will have to provide copies of various documents. Missing documents cause delays so gather the following as soon as possible:
- Two months of pay stubs.
- Two months of statements from every financial institution you use. Include all pages, not just the summary.
- Two years of W-2s. Expect them to contact your employer to verify your work history.
- Two years of tax returns.
- If self-employed, a business license or other proof such as a letter from your CPA showing you have been employed for two years or more in the same field.
- Rental history.
Once you find the house you want, several other documents on the home will be needed before the loan is finalized. Your lender will guide you through this process.
Your Realtor® can answer many of these questions as you are searching for your new, beautiful Alexandria home. If you don't have an exceptional real estate team committed to Going Beyond Your Expectations, please consider RE/MAX Evolution & David Zadareky.
Blog Tags
Print
ShareBe the first to comment on this blog entry!