fed rate hike 2019

Do this first if you want to buy a house this year

Bethany Ramos First-Time Homebuyer, Getting Prequalified, Home Buying

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In many parts of the U.S., homebuyers searching outnumber homes that are available. This can quickly heat up market competition. When a market’s competitive, buyers need more leverage, or a way to stand out. One smart step to show sellers you’re serious, and to beat out other bidders, is to get prequalified or pre-approved before you ever start hunting.

Right now, low rates, along with increases in inventory, income, and buyer confidence, are putting pressure on the housing market.

Even if your local market isn’t that competitive (yet), getting prequalified for a mortgage early still has its benefits. Once you get prequalified, you’ll know how much house you can afford to buy. Having a clear picture of your housing budget can give you assurance: You’ll know whether or not the monthly mortgage payments on your dream home make financial sense.

Get prequalified first and gain a buyer’s advantage

In the “My Home” section on their site, Freddie Mac spells out the perks of early prequalification:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

You can narrow down a lender based on great rates; great, local service; and a great selection of mortgage programs with options to get you home in as few as 10 days. A lender who offers a “like cash” early pre-approval mortgage program could also nearly double your odds of beating out other buyers. If you already have a local realtor, you can ask for a referral to their preferred lender.

Once you’ve made your pick, it’s time to take the first and most important step as a homebuyer. Fill out your loan application (and save time by doing it remotely). Provide your important financial information that includes your debt, credit, residential, and employment history. Then learn how much home loan you qualify for in minutes.

Now borrower-generated prequalification letters are a thing. Get prequalified in 15 minutes and get the power to instantly create your own prequalification letter to strengthen your offer on a house.*

According to Freddie Mac, there are ”4 Cs” that a lender will use to determine the amount you qualify to borrow:

  1. Capacity. This reflects your present and future ability to make mortgage payments.
  2. Capital. Also called your “cash reserves,” this takes into account your funds, including savings and investments, that can be quickly sold to cash.
  3. Collateral. This is the home, or property type, you’re interested in purchasing.
  4. Credit. This is your history, and particularly your timeliness, of paying debts and monthly bills.

Getting prequalified is the most important step you can take to look attractive to a home seller by showing them you’re a buyer prepared to close the deal. After your offer is accepted, early prequalification is also likely to speed your mortgage process along.

Whew: This part is fast and easy

It’s common for potential homebuyers to put their dreams on hold because they overestimate credit score requirements and the amount of their down payment. Get prequalified, and you could be in for a pleasant surprise. Many buyers are happy to hear they can afford more than they thought and might be eligible for low- and no-down-payment mortgage programs that make upfront costs even cheaper.

*During normal business hours.

For educational purposes only. Please contact your qualified professional for specific guidance.

Sources deemed reliable but not guaranteed.

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