Getting finances in order helps home buying experience

If you’ve bought a home or just thought of doing so you’re probably familiar with the basics of home loans and how one goes about getting financing to make a home purchase. The first thing we as Realtors will recommend you do once you’ve met with us is to get pre-approved, which to me begs the question, why not get fully loan approved?

I closed a transaction with a lender and we were discussing just that, and I thought it something that warranted a larger conversation. If one is seriously interested in purchasing a home, getting fully loan approved and then finding a home that matches your wish list is something I think more people would do well to consider.

Lets review the advantages to getting a full loan approval prior to hunting for your home and what that means for both buyers and sellers.

Why get a full loan approval before home shopping?

One major advantage this gives a buyer in a competitive climate such as the current Central Florida market is it shows the seller that the buyer is serious and actually qualified to purchase their home. A full loan approval can close much quicker than a buyer who is pre-approved and needs to go through underwriting. Obviously both buyers in this scenario are going to need to order an appraisal with their lenders to demonstrate that the home they’re buying is worth the money being lent so that will need to take place either way. While there is no way around the time an appraisal takes, imagine if you are loan approved and in a multiple offer situation with other buyers who still need to go through underwriting and the rest of the process. You will be able to close faster and as an agent I can communicate this to the seller, which gives us a competitive edge in negotiations.

Some buyers end up loan approved in scenarios they don’t intend to be such as if a deal falls through or say a home wasn’t foreclosed properly and they have to look for another home. Then when they go to look for another home the next process is easier as they’ve done all the legwork.

Every case is unique, which is the fun part about real estate. While maybe not every buyer will find the prospect of a full loan approval before house hunting necessary or enticing, control freaks like me relish this concept. Imagine eliminating the surprises of the financing process en masse before your Realtor even writes your first contract. No matter how credit worthy a buyer is, it’s entirely possible and common to come across items on your credit report you didn’t know were there. Maybe it’s a simple question about a previous purchase or marriage that an underwriter has or a creditor that didn’t report something correctly. It’s always best to control the things in life that we can, and getting your personal ducks in a row before setting foot into the first house you look at offers a rare chance at peace of mind in the somewhat stressful scenario of buying.

Are there any downfalls to getting fully loan approved first?

The lender I described working with and having the discussion about getting a loan approval first in the initial paragraph is John Seybert, president of Patriot Home Funding based in Altamonte Springs. One of the things I wanted to know from him when penning this piece was if there were any downsides. In essence it appears that there aren’t really any if done correctly.

One question I get frequently that I posed to John is “Will this hurt my credit?” Buyers are rightfully aware of how their credit score impacts their interest rate and their ability to buy. Sometimes I’ll meet buyers who are afraid to have too many credit pulls when searching for a home. John advises that within reason pulling your credit to get loan approval isn’t harmful. Many buyers will shop rates with different lenders and the bureaus understand this. As long as you are having credit pulled within say a 30-day period, a credit pull won’t ding your credit and drop your score, even if you check with more than one lender. Another thing we talked about is that lenders will do a soft pull anyway prior to close to check that your current credit and debt scenarios haven’t changed since the initial evaluation. If you are purchasing within a reasonable proximity of the initial pull lenders won’t need to keep pulling your credit and won’t harm your score by doing so. Now if you get loan approved then wait eight months to buy a house, yes, your lender will pull your credit again. But it would be the same thing for a pre-approval here too.

In summation: In a competitive market it pays to be prepared

If you are considering a home purchase getting a full loan approval first is nice option to mull over. Essentially you can eliminate surprises and gain an edge in contract negotiations by leveraging your ability to move faster to the closing table than other buyers. Yes, you will be asked to provide some updated docs prior to closing like bank statements or pay stubs and yes, you will still need to complete an appraisal with your lender. These are steps you will take anyway so why not think about getting them out of the way before you fall in love with a home?

These days everyone is excited to go look at homes, and when there are multiple offers on the table it can be hard to stand out or worse yet you can get caught up in the pressure to win the bid and over bid. Being loan approved can give buyers the calm and confidence needed to navigate the home loan waters with ease. Something to consider as it’s always good to have options, no?