If you or someone you know is thinking about buying a house in 2019, following are some commonly asked questions and answers to consider.
Q: Should I get preapproved 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 two or three days later.
Panicked, they call their agent, who connects them with a good lender, and then they have to go through a fire drill to get preapproved.
Q: How long does a preapproval 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 two weeks if you do it ahead of time.
Q: What’s the difference between a prequalification and a preapproval?
A: A prequalification means a lender has reviewed your information (usually verbally) and has determined 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 preapproval.
If you’re preapproved, it means you have undergone the extensive financial background check, which includes reviewing your credit history and 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 showing the maximum amount you are approved for.
Most sellers prefer buyers that have been preapproved.
Q: Is a preapproval 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 percent down payment fairly liquid. You’ll typically need 3 percent of your purchase price for your initial deposit – your good-faith deposit – very shortly after you make an offer (that is, one to three days). Don’t make any large purchases or open or close any credit or bank accounts after you get your preapproval – such actions 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 a trusted adviser who will walk you through the entire process to make it as smooth and stress-free as possible considering the complexities involved. (If he or she isn’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.