STEP #1) SHOP FOR A HOUSE OR GET PRE APPROVED?

 
 

🎉 So you found the perfect home!!! 🎉

 
 

WooooHoooo!!

You call your favorite Realtor®, put in an offer, and the very next day you find out your offer was accepted!!

🎉 YESSS!! 🎉

The next day you drive to escrow to place your $1,000+ deposit (Or less/more. Deposits are always negotiable) and your Realtor® refers you to a their most trusted loan officer so you can apply for a mortgage!

YOU ARE OFFICIALLY IN ESCROW! YAYY!

The days start to progress! Your Realtor® notifies you that it’s time to order your home inspection (typically $200-$500). The home inspector provides you with the inspection report and the home is in great condition!

Awesome!

Then your Realtor® tells you that it’s time to order your appraisal report (typically $400-$550). A couple days later the appraiser goes out and completes their report. In the following days, you receive the appraisal report and it appraised for at offer price!

Woohoo! The hard parts done!

 
 

You have everything ordered, everything checked off with the homes value and condition, and you are ready to rock and roll! 🎉

Things are looking great!

You’ve been in escrow for about 15 to 17 days now and you are so close you can almost taste it!! Yesss!!! You purchase new furniture and you transfer your kids out of school! You are on cloud 9 and things couldn’t go any better.

The very next day, you receive a call from your loan officer and you miss it because you are watching your favorite rerun of Kings of Queens. Oh well, it can wait...

Then your loan officer immediately sends you a text message and asks you to call them back immediately.

 
 

Oh-oh!

You step outside, give them a call, and the phone starts to ring. It rings about 8 times before they answer. They greet you and ask you how your day is going so far. You say “Great! So what’s going on, what is it that you wanted to tell me?”

They clear their throat and say “I’m very sorry, but we regret to inform you that your application has been denied due to _”

NNNOOO!!!!!!!!

What do you mean? How can this be! I took my kids out of school! I already purchased furniture! I already paid for the appraisal and home inspection!!

Your loan officer explains the details, apologizes once again, and the phone conversation ends.

THIS CAN’T BE…

 
 

This situation happens time after time again! In this scenario the buyer would unfortunately not only be in jeopardy of losing their entire deposit of $1,000+ but they are also losing out on the $200-$500 they paid for their home inspection, the $400-$550 they paid for the appraisal report, and the fee they paid for their credit report!

WHAT A FREAKING HEADACHE!

That’s about $2,000 lost that could have been very easily avoided if the proper steps were taken!


HOW DO YOU MAKE SURE THIS DOESN’T HAPPEN TO YOU?

 
 

The number 1 way you make sure this scenario does not happen to you is by…

GETTING PRE APPROVED BEFORE HOUSE SHOPPING!

By getting pre approved before shopping for a home, you are making sure that you have a very high chance of getting approved for your home loan before submitting offers on homes, entering into escrow, and before placing a deposit!

Once you place a deposit, it is safe and 100% refundable unless you remove all of your ‘contingencies’.

Contingencies are protection clauses set forth in the purchase agreement that protect you in the event that you were to cancel escrow for the following reasons; the value came under your offer price (you submitted an offer at $400,000 and the house appraised for $380,000), the home inspection presented issues you are unwilling to take on by purchasing the home (The home inspection provided foundation issues), if there is an issue with the title of the home, or if your mortgage application is denied.

Contingencies are supposed to be removed within certain periods throughout escrow. The maximum days to remove contingencies are 17 days for the appraisal, title, and buyer inspection contingencies and 21 days for the loan contingency (unless otherwise agreed to in writing). Never remove a contingency before fully performing your due diligence of buyer duty as this can warrant you to lose your deposit if escrow is canceled for any reason. Make sure to consult with your real estate professional regarding your contingencies and contingency periods. Getting pre approved before home shopping allows you to make sure you never find yourself having to prematurely remove contingencies.


 
 

Another reason to get pre approved before home shopping is that getting pre approved is the only way you will know what your price range is! There is no other way of knowing what the maximum amount you can qualify for will be, as well as getting a solid understanding of what the monthly payment will be at such a price. Make sure that you are comfortable with your monthly payment and you are not over leveraging.

Nothing is worse than falling in love with a home that you cannot qualify for.

Finding a home that you absolutely love but is hundreds or thousands more each month than the amount you are comfortable with can force you into making an emotional and rash decision. The only way to get a handle as to what monthly payment and purchase price you will be comfortable in is by getting pre approved.


 
 

The last reason that you should get pre approved before shopping for a home is that sellers/listing agents are going to more than likely require you to submit proof of funds, a pre approval letter, credit report, and possibly even your tax returns and W2’s to their preferred lender before the seller even considers your offer. (Vital information like social security numbers should always be blacked out)

The reason they do this is because by cross qualifying you with their preferred lender, they are getting a secondary stamp of approval that you will more than likely qualify for the home loan so the seller doesn’t enter into escrow and wait 30 days just to find out that the buyer was denied later on down the road. They would have to cancel escrow, place the property back on the market, and show the home all over again.

Although the seller will more than likely keep the buyers deposit in the situation above, this can be a serious issue for a seller that is in a time sensitive situation like pre-foreclosure or if they are moving out of state due to work and purchased another home. They can find themselves having to carry two mortgages.

This was very common in the past and unfortunately, it still happens till this date! This is why it is very important that the very first step you take when thinking of purchasing a home is to get pre approved.

Protect your self at all times and if you have any questions about the mortgage or real estate process, feel free to reach out to us and we’d be happy to help!