September 2023 HBREA Submission
By: d-mars.com
News Provider
HAR.com
Before even starting to search for your dream home, get pre-approved or pre-qualified for a mortgage to know your limits and the best type of financing available. With the current limited supply of homes on the market and the multiple offers many properties draw, sellers may not consider an offer without pre-approval or pre-qualification, so be prepared! Pre-qualification and pre-approval mean different things.
To get pre-qualified for a mortgage loan, you provide a lender with your approximate income, current debts and any important details from your credit history. The lender will then use these details to determine how much you may be eligible to borrow. You may receive a Conditional Qualification Letter from the lender, which determines your likelihood of getting a home loan. However, it’s important to know that all information submitted during pre-qualification is subject to verification when your actual loan application is submitted. There is no guarantee that you will receive a home loan until your financial situation is verified.
Being pre-approved for a loan typically means that the lender has gone one step further and verified your financial situation. When you get pre-approved, you will complete a mortgage loan application and may have to pay an application fee. Your lender will commit in writing to fund your loan, but only after an extensive examination of your financial situation and pending a successful appraisal of the home and a few other conditions.
Being pre-approved for a mortgage loan doesn’t mean you are borrowing the money or that you are obligated to. It just means the lender must stand behind his written commitment to fund the specified amount unless something changes your situation. Think about how attractive your offer will be to the seller if you submit it with a letter pre-approving you for the loan.
Some situations could cause a lender to withdraw from funding a loan even after a pre-approval letter is issued. If your credit situation changes between the time the pre-approval letter is issued and the loan’s funding, then the lender could change the interest rate or even deny the loan application. So, while you’re buying a house, it’s important not to apply for credit cards or other loans that could change your credit situation.
The best way to check out what a lender is going to see in your credit history is to get a copy of your credit report. This document lists your financial history, including total debt and whether you pay your bills on time. Regularly checking your credit report is the best way to spot identity theft, credit report errors or other blemishes that could affect your ability to buy a home.
By law, you are entitled to one free credit report every year from each of the three credit-reporting bureaus – Experian, Equifax and Transunion.
By taking steps to secure your finances, you increase your ability to get pre-approved for a home loan. And this will put you one step closer to being in the home you dream about for you and your family.
For more information about buying and selling property in the Houston area or anywhere in Texas, I encourage you to visit HAR.com.
Felicia Guidry is 2023-24 President of the Houston Black Real Estate Association (HBREA).
