The most exciting part of the house hunt is the actual hunting process. That being said, the most important part is the mortgage approval process. It’s important to have a handle on the financing end prior to actively looking for a home.
There are many reasons to get approved for a mortgage prior to your home search. When approving a buyer for a mortgage the lender will inform the buyer about the amount the borrower can afford to borrow. That’s the starting point. Understandably, not everyone feels comfortable with buying the most expensive home they can afford. Part of the approval process is figuring what your comfortable monthly payment looks like, and what that means for your target purchase price. If you’re comfortable monthly payment, including principle, interest, taxes, and insurance (also known as PITI) is $3,000, your lender can tell you the price tag on the home you can afford. That’s a pretty simple equation: Down Payment + Mortgage Amount = Price Price.
In this digital age it’s pretty easy to gather the necessary documentation needed for a mortgage approval. Typically, a lender requests 2 years of tax returns, two months of bank statements, and 2 months worth of pay stubs. A borrower can upload the documentation to a lender’s website and securely share their documentation. The lender will also obtain credits reports and use those to complete qualification process for the borrower. In an ideal world the lender will have your mortgage approved by the Underwriter at the end of this process. At that point all you need to do is find the perfect home.
Shopping for a home with a mortgage approval in hand means you’re able to make an offer any home that strikes your fancy. In a fast moving, competitive real estate market, a buyer may not have time to complete the approval process prior to a seller reviewing offers. Furthermore, serious sellers and experienced Realtors will not accept an offer without an approval letter or proof of down payment.
If you need a referral to an outstanding mortgage lender please reach out to me for an introduction! I’ll happily connect you with the right professional. Happy house hunting!