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| PREAPPROVAL (A necessity or a crock???) From now on, when you are see "PREAPPROVAL" think of it as "PREQUALIFIED -with some conditions attached". Most Banks or lenders promote the "PREAPPROVAL" as a first step to buying a home but it is really their way of drumming up new mortgage business. It is a misconception to walk around saying you have been "PREAPPROVED" when you have no written commitment in your hand from the lender or indeed if there are any lender policy restrictions attached to a verbal ok. The fact is that the "PREAPPROVAL" is always subject to some provisions that must happen before the lender is fully committed to giving you a mortgage. Is that what you wanted? Basically it means that you have been "PREQUALIFIED" to buy in a certain price range but with certain conditions. Any competent Realtor is capable of determining what your price range is based on the information you provide and may even have several better financial contacts that may be worth checking out. Searching for a piece of real estate without knowing what you can qualify to buy is really a waste of your time and ultimately can have negative effect on your whole perception of the purchase if you love it and can't afford it. If you choose to go Banks route, first the make sure up front that they are prepared to provide you with a written commitment for a fixed period of time and it is irrevocable. It wouldn't be the first time a lender reneged on a written commitment but it is always nice to have the paper when you need to speak to the CEO of the institution or as a last resort, speak to the consumer editor of the local newspaper. Don't let the lender try and tell you that a written commitment isn't necessary because it is always their policy to stand behind their word. It is always a wise decision to get one, even if you decide later that you may not purchase right at that time. Finding out what price range you should be looking in and is relatively simple once you have determined the maximum amount of mortgaging you qualify for. Just add the amount of money you are planning to invest in the down payment (savings or other investments) to the mortgage amount you have figured you qualify for with your incomes. These figures together will help you arrive at the maximum total purchase price you may want to pay for the property you will choose to buy. Without ascertaining these numbers a head of time you may be out looking for properties that are below your capabilities or conversely, outside of your ability to qualify for. In any case it behooves you to be prudent in your quest for the best possible financing package and explore all of the opportunities that are available to you. When buying real estate there are two main objectives that must be accomplished when it comes to the Financing the purchase. These are simply that the buyer must qualify in terms of income and credit worthiness to repay the debt and the subject property must also qualify to meet the standards of the lending institution. This is to say that the property must be appraised by a qualified appraiser to satisfy the lender that they are offering a mortgage that is protected by virtue of the value of the property. In other words, a lender will provide a mortgage up to a certain percentage of the appraised value of a piece of property, the terms of which may vary depending on the lending policies of the particular lender. You will not find a lender who will be willing to finance 100% of the appraised value of the property too easily and if you do, seek legal council before you proceed to signing any documents. There are circumstances where a conventional mortgage lender will not be able to help you and in this respect you must undertake the services of a Mortgage Broker. Some repeat buyers exclusively use the services of a Mortgage Broker in all of their purchases because of the obvious advantage of the availability of a variety of lenders. We've talked about Banks so now how about choosing a competent Mortgage Broker? Yep... there are all kinds of them also. Some who profess to be your best buddy and dazzle the unwary with gimmicks and flash dances to win your confidence. As with choosing any consummate professional the best advise is to look at the background and subsequent performance of the individual. You will ultimately be putting a lot of faith and trust into this person to get the best deal for you so better make sure they earn it... first. There are some really excellent people out there who save the day on a regular basis and do so honestly. We are not talking about flim flam artists who get you into a financial nightmare before, during or after the deal closes. There are plenty of those out there also. Look for someone with a banking, financial or lending background without the institutional type of mentality. They should know how the lending system really works and not the "pretender" who just barely passed the mortgage exam and was a bank teller for a few years. Then there is the unconscious ones who betray your trust and don't evem know it. Ask about their history... where they came from... how long have they been doing what they are doing and always ask for references. You cannot be cautioned enough on picking the one with whom you feel most comfortable because they will know everything about you and the success of your purchase may rest on their personality and competent performance. For most conventional transactions the Mortgage Broker will be paid a finders fee from the lender so there should be no cost to you whatsoever. In those circumstances where some creative financing is necessary their fees should be nominal if they want your future mortgage renewal business. It's as simple as that. Armed with this information you can now explore the world of the MLS (Multiple Listing Service) with a competent Realtor, again of your choice. But that also, is another topic you may want to explore by reading all about in Agency1o1! BACK TO www.realestate1o1.com |