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NMLS #1547953

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Preparing To Purchase a Home

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Exploring Your Mortgage Options

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Getting Approved

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Working With an Agent

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Finding a Home

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How To Make an Offer

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Preparing To Close

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Closing on Your Home

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Managing Your Mortgage

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1. A MORTGAGE APPROVAL WILL SHOW WHAT YOU CAN AFFORD

When you’re searching for a new house, it may be tempting to scope out potential neighborhoods and browse through listings. However, buying a house means you should get approved first before you fall in love with your dream house. That’s what a mortgage approval is, and it helps you understand how much you can afford to pay and give you an estimate of your monthly payments.

WHAT’S AN APPROVAL?

An approval is when a lender decides that you’re a good candidate for the mortgage, after reviewing all the financial information you have provided him with. In the approval, you’ll be given an estimate of the interest rate, the loan amount, and the monthly payments. The process is different with every lender and is known as ‘prequalification’ or ‘preapproval’ by some lenders.

WHY IS IT IMPORTANT TO GET APPROVED?

There are several advantages you gain if you get approved first. These include:

  • An understanding between you and the real estate agent about what you can afford, so there’s no time wasted looking at homes that aren’t in your budget.
  • You’ll be in a great position to make a solid offer on a house since the seller will know that your finances have been verified by a lender.
  • You won’t face any surprises that may slow down the closing of your loan, once your offer has been accepted.

You should know that getting approved is only the first step towards qualifying for a mortgage and buying a house. After you’ve found a house you like and made an offer, a third-party will appraise the house and it must pass inspections. If your financial situation changes, it could impact your approval amount.

2. WHAT LENDERS REVIEW

Mortgage lenders review three criteria when they’re determining the amount you can borrow. These are your credit, your assets, and your income.

YOUR ASSETS

Assets are those things you can convert into cash. These may include personal property, real estate, stocks, savings and checking accounts, and more. Assets are reviewed by lenders to ensure that you have enough finances to keep up with your mortgage payments after the closing.

YOUR INCOME

Your income will be reviewed by lenders to calculate if you can make your monthly mortgage payments. Your debt-to-income (DTI) ratio will also be checked to ensure that the debt you owe isn’t higher than your income. Generally, a mortgage company will want you to have a DTI of less than 50%.

YOUR CREDIT

You can qualify for better interest rates if you have a good credit score since it shows that you’re a responsible borrower. A few mortgage lenders also have requirements for a minimum FICO® score.

WILL GETTING APPROVED AFFECT MY CREDIT SCORE?

Your credit report is going to be pulled when you’re trying to get approved for a mortgage, which will depreciate your credit score by a few points. But, if several lenders review your credit in a short period, the credit bureaus will look at this as inquiries for a single credit pull, and your score will only drop once. It is very important NOT to have multiple credit lenders review your credit score when buying a house.

3. STEPS TO GETTING AN APPROVAL

Every lender has its own approval processes. At Iconic Mortgage Corp, we have three approval levels, which include the following:

PREQUALIFIED APPROVAL

Getting a prequalified approval online is the easiest way. Once your account is created, you need to:

  • Answer a couple of questions regarding your assets and income
  • Grant us permission to pull your credit report

Once you have been approved, you may print or download a Prequalified Approval Letter that can be shared with your real estate agent to begin the home hunting process.

VERIFIED APPROVAL

Your bargaining position is strengthened early on with a verified approval. This involves verifying your finances, which allows you to put forward a strong offer as it indicates to the seller that you can afford purchasing a house. A Home Loan Expert will review your assets and income in 24 hours, and you’ll be provided a Verified Approved Letter with the amount you have been approved to borrow from the lender.

RATE PROTECTION APPROVAL

If you want the strongest approval, along with protection from increasing interest rates, you can ask a Home Loan Expert about how you can get Rate Protection Approval. The experts will explain everything you must do and will check your financial information, to lock the rate for 90 days, when you’re shopping around for a house. This is a win-win scenario for you since if the rates increase it won’t affect your rate; however, if they decrease, your rate will go down as well.

HOW LONG IS AN APPROVAL LETTER GOOD FOR?

In general, approval letters are only valid for 90 days but this will depend on your loan type as well. You’ll have 90 days to make an offer to buy a home after you get the approval letter, and if you don’t make it in that time, you’ll need to apply for approval again.

4. HOW TO CHOOSE A MORTGAGE COMPANY?

You’ll need to ask a couple of questions before choosing a mortgage company, and that will involve asking the following:

  • What fees or rates are charged?
  • What’s your average time for closing a purchase home loan?
  • What’s your rating for client satisfaction?
  • Will you be available if there are questions I need to ask or if I want to get in touch?
  • Do I need stamps and a fax machine or can it be done online?

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Further Reading

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