A real estate version of the chicken or egg question is over whether you really need to get pre-qualified for a mortgage before shopping for houses. After all, your brain may still be in the exploratory phase of home buying, or maybe you’re not sure if you are ready to get that close to the homeowner commitment and the idea of giving up all that personal and financial information just seems like premature and questionably unnecessary trespassing in your private space.
Well, here are four compelling reasons for making the leap of faith with a mortgage rep for a full application and a credit report:
First of all, you get to find out exactly how mortgage-able you are. Even if you have a high creditworthy self-image, there are mortgage underwriting sinkholes that may be lurking. High credit scores, big down payments, great jobs and lots of income may not protect you from some obscure underwriting nuance that nobody saw coming. QM (Qualified Mortgage) is the mortgage loan construction framework that protects lenders from the dreaded loan buy-back, and it is a good idea to find out whether you qualify for your QM merit badge. If it turns out that an unforeseen curve ball barrier to your home buying plans does exist, better to shine a light on it now and get to work fixing whatever it is that broke while you weren't looking.
Next, when you get mortgage pre-qualified, you get lots of information to help you make good, well-informed decisions. Through the magic of technology, mortgage reps can instantly send you monthly payment breakdowns so that you can see the components of what you will be writing a check for every month. Detailed and itemized closing costs worksheets, custom fit for your specific purchase scenario, can be reviewed and reconfigured for different properties as you journey through your house-hunting quest. Know what all of the costs are, find out about things like escrows and pre-paids, and ask who gets paid what and why. Knowledge is power, and since mortgage pre-qualification information is free and accurate (hopefully), arm yourself with as much fortification as you can. You will be glad you did.
Compelling reason #3 is the reality that you are competing for limited supply (the house you want) with potentially more demand than just you. There may be other buyers coveting the property that you have already emotionally claimed as your own. The winning bidder is going to be the one best presented; with of course the best offer number. That being said, if you were the seller, you would want the strongest, shiniest, blemish free, ready to go buyer available. A formal pre-qualification can present you in just that shining light. If there are “barrier” issues like a house to sell or a small down payment, a fully vetted and vouched for mortgage pre-qualification just might be the golden ticket that gets you the top spot on the podium.
And last, but of course not least, understand that real estate agents do a lot of work but only get paid at the end, if and when you close on your new home. All those evening and weekend phone calls, all the appointments they make to show you houses, all those houses they take you to and hope that you fall in love with and buy, all of that is done on their dime, hoping to cash out at the end of process. It is in their best interest, it is justifiable and understandable, and it makes perfect sense that they would require some tangible proof of your ability to do what you wish to do in what could be an epic house-hunting adventure, of which you both are about to embark. With all of the many unknowns your real estate agent will encounter as they work to find you the perfect home, you being able to get mortgage financing should be a box already checked.
And while it may be a stretch to describe home buying as a blood sport, it can be said that the race to the winning bid on a coveted property has left some homeowner candidates’ ego bruised and expectation battered. Be formidable; arm yourself with as many tools as will gain you a competitive advantage in the house-hunting, multiple-bid-real-estate arena. Preliminary mortgage pre-qualification is a top-of-this must do if you are a serious buyer.
A loanDepot licensed loan officer can help with these and any other lending questions. Call (888) 983-3240 to speak with one today.
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