If you or someone you know is thinking about buying in 2019, here are some commonly asked Questions and Answers for you.
Q: Should I get Pre-approved with a lender?
A: Absolutely! It’s a common scenario: Buyers are looking, looking, looking and BAM!…they find the perfect house only to find out that offers will be reviewed 2 or 3 days later. They call their agent in a panic who connects them with a good lender and they have to go through a fire drill to get pre-approved.
Q: How long does a pre-approval take?
A: If you are in a real jam and have a good relationship with your lender you “MIGHT” be able to get it in a day…plan on a relaxing 2 weeks if you do it ahead of time.
Q: What’s the difference between a Pre-qualification and a Pre-approval?
A: A Pre-qualification means that a lender has reviewed your information (usually verbally) and has said that you POTENTIALLY could get a loan for the amount you have asked for assuming that all of the information you provide to the bank is accurate and true. This is not as strong as a pre-approval.
If you’re Pre-approved, it means that you have undergone the extensive financial background check, which includes looking at your credit history, previous tax returns and verifying your employment – and the lender is willing to give you a loan, basically meaning you’re approved!
You will usually be provided an accurate figure which shows the maximum amount that you are approved for. Most sellers prefer buyers that have been Pre-approved.
Q: Is a Pre-approval a guarantee that you’ll be able to get the loan?
A: Not usually. You’d think so but imagine a scenario where the income that was used to approve the loan goes away. (Breadwinners lose their jobs, buy a jet boat on credit, etc)
Q: What else should I do now if I am considering buying?
A: Make sure you have your customary 20% down payment fairly liquid. You’ll typically need 3% of your purchase price for your initial deposit/”good faith deposit” very shortly after you make an offer (EG: 1-3 days). Don’t make any large purchases, open or close any credit/bank accounts after you get your Pre-approval which could negatively affect your approval.
Q: Should I select my REALTOR® now or wait until I find a house I am interested in?
A: Your agent should be your trusted advisor who will walk you through the entire process to make it as smooth and stress-free as possible considering the complexities involved. (If they aren’t, you need a new agent!) So, yes, I always advise getting your agent involved as soon as you know you are considering a purchase.
Owen Halliday is a REALTOR who manages the Sereno Group Real Estate office in downtown Los Altos. If you have a subject you’d like addressed in a future column, Owen can be reached at firstname.lastname@example.org or 650-492-0062.