fed rate hike 2019

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

Bethany RamosFirst-Time Homebuyer, Getting Prequalified, Home Buying

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In many parts of the U.S., homebuyers searching outnumber homes 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 before you start hunting for a house.

Right now, historically low rates, record-low housing inventory, and extra-high levels of buyer demand 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 advantages. Once you prequalify, you’ve taken the first step to buying a house. You’ll know how much you can afford. Having a clear picture of your housing budget gives 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 everyone work with their lender to get preapproved before beginning to house hunt. Shopping with a preapproval letter in hand boosts the confidence of both you and the seller, which helps your journey run a lot smoother.”

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 weeks faster than the industry average. If you don’t already have a realtor, you can also ask your loan officer for a referral to a local agent they’ve worked successfully with.

Once you’ve picked your lender, it’s time to take the first step to buying a house. 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.

Borrower-generated prequalification letters are a thing. Get prequalified in 15 minutes and gain 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 isn’t just the first step to buying a house. It’s also the most important step you can take to look attractive to a seller by showing them you’re prepared to close the deal. After your offer is accepted, early prequalification is also likely to speed your mortgage process along.

If it’s so important, then why are so many buyers skipping this step? As a recent realtor.com survey noted**:

“Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52 percent obtained a preapproval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.”

Prequalifying — and moving forward into full loan approval, where you’ll receive a preapproval letter — is a strategic move to make in today’s highly competitive environment. Since inventory is so limited, creating a seller’s market, competition is fierce among homebuyers. Right now, the average home is receiving more than four offers. Meaning, you may be vying for your dream house with no less than three other buyers.

Working with a lender offering a full loan approval program (also called Early Bird Approval) gives you the chance to get your finances and credit approved upfront. This “like cash” early preapproval program could also nearly double your odds of beating out other buyers.

So, not only will you grab a seller’s attention. You won’t have to deal with a bunch of paperwork after you’re under contract. As a result, your loan is likely to get funded faster.*** The seller gets their money quicker. You get into your new home sooner. Everybody wins.

With a multi-offer situation being probable, getting prequalified and having early loan approval will help separate you from the pack. Danielle Hale, realtor.com’s Chief Economist, considers** it “typically essential” to be a preapproved buyer in an active market — getting this step taken care of before you ever start looking for a house.

Whew. This part is easy and fast.

Maybe you’ve put your dreams on hold because you’re worried about your credit score and how much you’ll need for a down payment. Prequalify now, and you could be in for a pleasant surprise. Many buyers are happy to hear they can afford more than they thought and may be eligible for low/no-down-payment mortgage programs that make upfront costs even cheaper.

*During normal business hours.

***Pending appraisal and title commitment approval.

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

Sources deemed reliable but not guaranteed.

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