The real estate market is soaring because of low interest rates that have brought home buying to average Americans. All over the country, more renters are buying and homeowners are upgrading their Singapore properties. In this hot seller's market, a pre-approval letter from your mortgage lender can help you secure a winning bid on the home of your dreams.
A pre-approval involves much more than filling out a questionnaire. It is essentially going through the entire mortgage application process and having the lender give you an exact figure of how much money they are willing to lend you and at what interest rate. Having the letter is like having the cash in the bank. This shifts your focus from financing to getting the best real estate agent and finding the best home that you can afford.
Pay attention to the terms of the letter before you start shopping for your home: What terms did your mortgage lender extend?
A simple prequalification where they took down your information and made an informal guess of what type of loan you will receive is usually not very effective. This basic prequalification of course is subject to running a full credit check, full disclosure of your assets, and no drastic changes in your financial situation.
Any lapsed payments on credit cards, student loans or a job change, can give your mortgage lender sufficient reasons to back out of the deal.
Here's how to get the maximum benefits out of the pre-approval process:
1. Start by using the resources on any major search engine. Look for “mortgage lenders,” “home loans,” or “pre-qualify for a mortgage”.
2. Fill out an application and make sure it goes through the underwriting process. If you're not sure, call the lender using their customer service number and ask them what happens after all the information is submitted.
3. Find out if there are any fees involved for pulling your three bureau credit reports, and for the underwriting. Some lenders will charge the fees up front and others will wait until you are approved for the loan.
4. Fill out any extra paperwork such as proof of employments and statement of your resources. You have to prove that you enough cash on hand for a down payment, unless you are getting a no money down home loan. Also, you have to prove that the cash is yours and not a loan.
If you want to a loan from your parents for example, try to get it six to eight months in advance and keep it in your savings account. Otherwise, it will count as a debt and could increase your debt to income ratio and have the opposite effect; showing that you don't have any cash and disqualify you from a much bigger loan.
5. Get a pre-approval letter from the lender stating the exact amount of the loan that you will receive and the interest rate.
6. Pay attention to the expiration date on the letter. If you are in a market such as Southern California where competition is particularly fierce, make sure you have the most flexible expiration date that your lender will allow.
Whether it's 30 days or 60 days, get it stated in writing. If you lose out on your first or second choice for a home (typical), you won't be stressed to settle for anything just to get a house.
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