HOW MUCH YOU CAN
Before you start house hunting, you need to determine how much house you can afford, which will entail getting either pre-qualified or pre-approved for a home loan.
A real estate agent can help you find a mortgage broker to begin the process. While getting pre-approved is a more in-depth process, a pre-approval letter lets both real estate agents and sellers know that you're a serious shopper who means business.
A pre-qualification can be done online or over the phone and does not require your submitting financial documents. You will be asked to provide basic information about your finances. With this information, the lender will estimate what your maximum loan amount could be if you were to apply.
A pre-approval is more involved and a real estate agent can help you prepare your documentation. The lender will perform an extensive review of your finances, requiring pay stubs, tax records, credit accounts, bank statements and more.
This figure will not only be a more reliable estimate of what you can afford, but your pre-approval also indicates that a lender is willing to do business with you, pending the purchase price, market appraisal and the underwriting process.
Your real estate agent should have a mortgage broker they are willing to put you in contact with ? this lender will be someone they have done business with in the past, and feel comfortable recommending. However, if you decide to do a little comparison shopping and look for a lender on your own, here are a few important questions to ask.
What loan programs do you offer and which one do you think is best for me?
How long will the loan approval process take?
What line items of the loan agreement ? if any ? are negotiable?
What is your policy for locking in interest rates, and will you honor a lower rate if it declines during the lock-in period?
Are there fees for prepaying on my loan?