This article has been written by David Kanis and Beth Burdick
Contact David Kanis online at www.ashefordfunding.com  
 

“Mortgages and More”

David Kanis and Beth Burdick

Get your financial house in order and get pre-approved for a mortgage

Spring is finally here and you’ve made that important decision. You are going to buy a home: a first home; a second home; a bigger home; a smaller home; a condo; a rental property.

You find a real estate agent who matches your personality and appears ready and able to help you. The first thing he or she asks you is whether or not you have been pre-qualified or pre-approved? Now you thought house hunting was the second great national past time (after baseball) and didn’t really acquire anyone’s approval. What your agent wants to know is have you spoken to a mortgage lender?

Your agent needs to know that you are a qualified buyer and how much home you can afford so that you spend your time looking at properties in your price range. Many buyers are uncertain about what constitutes being pre-qualified versus pre-approved.

The pre-qualification process normally involves a phone conversation with a lender. You will be asked questions about your down payment. How much do you feel comfortable parting with to complete the transaction and what is the source of those funds? You will be asked some questions about your income. Are you salaried or self-employed? Are you retired and if so do you receive pension or social security income. What is your gross monthly income? You will be asked about other monies you might have including stocks, bonds, 401K or money market accounts, as well as current balances in checking and savings accounts. Finally the lender will ask for some information that will allow them to pull your credit report. We will discuss more about credit scoring in a future column.

If your spouse or partner will be a co-borrower on the loan they will need to supply the same information. You will also be asked what level of monthly payment would make you comfortable. Based on the information you have communicated and your credit report the lender will issue a preliminary pre-approval. This indicates to you and your agent that he/she believes you to be a qualified buyer.

To be pre-approved for a mortgage you must physically document the verbal information you provided to the lender. Thanks to fax machines and scanners this is a relatively easy process. The lender will then perform a thorough analysis of your income, assets, and debt profile and issue you a pre-approval letter.  It pays to get pre-approved before you make an offer to purchase. Your offer will be considered more favorably by the prospective seller than the offer of someone who is only pre-qualified.

Once your offer has been accepted you will begin the formal application process of getting a mortgage. Since the lender already has your pertinent information the process will be relatively straightforward and simple. Remember that you are only one half of the equation. The other half is the property you are purchasing. It must appraise for the purchase price and have clear title.

Once your application has been approved there may be some stipulations that must be cleared before you can close, like purchasing an insurance policy, having a termite inspection or providing up to date financial information if some time has elapsed between your approval and the closing. This often occurs in the case of new construction. Remember the actual contract is signed at the closing.

Let us offer one final word of advice. Don’t set off on a spending spree once you have completed your loan application. We understand that there are things you will need, including furniture. But if you rack up credit card debt it impacts your credit score and the lender could pull your credit again just prior to the closing. Put your credit cards someplace safe – like the freezer. While you are waiting for them to thaw out email us your questions.

David Kanis and Beth Burdick combine twenty years of financial management and lending experience. In addition to operating Ashford Mortgage, they teach mortgage and finance classes at the Carroll Phillips Cumbie Real Estate Institute and at local real estate firms. Contact them at Ashford@mortmoney.com.

This article has been written by David Kanis and Beth Burdick
Contact David Kanis online at www.ashefordfunding.com