Get Loan
Preapproval
Few people can buy a home for cash. According to the
National Association of REALTORS® (NAR), nearly nine out of
10 buyers in 1999 financed their purchase, which means that
virtually all buyers -- especially first-time purchasers --
required a loan.
The real issue with real estate financing
is not getting a loan (virtually anyone willing to pay lofty
interest rates can find a mortgage). Instead, the idea is to
get the loan that's right for you -- the mortgage with the
lowest cost and best terms.
REALTORS® routinely suggest that consumers
start the mortgage process well before bidding on a home.
Many lenders and programs, for example, are available right
here in the Real Estate Services section of RI Living.com as
well as through recommendations from local REALTORS®. By
meeting with lenders -- either online or face to face -- and
looking at loan options, you will find which programs best
meet your needs and how much you can afford.
REALTORS® also recommend preapprovals for another reason:
Purchase forms often require buyers to apply for financing
within a given time period, in many cases, seven to 10 days.
By meeting with loan officers in advance and identifying
mortgage programs, it won't be necessary to quickly find a
lender, check credit, and rush into a financing decision
that may not be the best option.
What is it?
"Preapproval" means you have met with a loan officer, your
credit files have been reviewed and the loan officer
believes you can readily qualify for a given loan amount
with one or more specific mortgage programs. Based on this
information, the lender will provide a preapproval letter,
which shows your borrowing power. You can visit as many
lenders as you like and get several preapprovals, but keep
in mind that each one carries with it a new credit check,
which will show up on future credit reports.
Although not a final loan commitment, the preapproval letter
can be shown to listing brokers when bidding on a home. It
demonstrates your financial strength and shows that you have
the ability to go through with a purchase. This information
is important to owners since they do not want to accept an
offer that is likely to fail because financing cannot be
obtained.
How do you get preapproval?
Real estate financing is available from numerous sources,
including lenders here in the Real Estate Services section
of RI Living.com, mortgage companies that have worked with
local REALTORS® and in some cases, individual REALTORS®
themselves. Based on his or her experience, the REALTOR® may
suggest one or more lenders with a history of offering
competitive programs and delivering promised rates and
terms.
The
loan officer will carefully review your financial situation,
including your credit report and other information. The
lender will then suggest programs which most-closely meet
your needs. For instance, a first-time buyer may qualify for
state-backed mortgage programs with little money down and
low interest rates, while a repeat purchaser (someone who
has bought a home before) with more equity (money invested
in the home) might want to get a 15-year loan and the lower
overall interest costs it represents. Typically, first-time
buyers opt for the traditional 30-year loan, with either a
floating interest rate or a fixed rate of interest over the
life of the loan.
Provided by the National Association of
REALTORS® and Realtor.com
