Obtaining a mortgage loan is drastically different than it was even a couple of years ago. Banks and lending institutions are becoming increasingly hesitant to lend money due to the financial crisis gripping the nation and the only thing that less-than-perfect credit will get you is a rejection letter.
If, however, you have done your part by maintaining an exemplary credit rating and have pinched and saved for a substantial down payment (think 20 percent), then you may be well on your way to purchasing your first Boston condo.
First Step: Preapproval!
An important first step in obtaining a mortgage loan is getting preapproved for a loan by a lender. For any first-time home buyer, this should precede any other moves you make, including looking for homes. A preapproval letter from a lending institution.
A preapproval letter will not only show sellers that you are credit worthy and are serious about purchasing a home, but will also give you a clear picture of what size loan you can realistically afford. It will also help you in negotiations. For example:
Couple A immediately heads to the financial institution of their choice and obtains a preapproval letter. Couple B skips this important first step and instead heads out to search for their dream Dallas County property.
Both couples end up falling in love with the same property, and both couples put in an offer.
Who do you think will get the house?
If you guessed couple A, you’re right. It is unlikely that a seller will accept the offer from Couple B because of the uncertainty of whether they can afford the home or even get approved for a mortgage.
Couple A, on the other hand, was prepared to make an offer, and the seller was comfortable accepting their offer because they were prepared and ready to own their first home.
The bottom line: make getting preapproved your first priority!