The majority of people buy their homes in the Boulder Area using a loan. Getting a loan is an incredibly important part of the home buying process. Getting pre-approved for a loan is the first step in the process. I highly recommend doing this before you start your home search. Buying a home is a multifaceted process with many moving parts. I always strive to be there and help my clients from the first steps of buying a home all the way to closing and anything they need in the future. I want to be able to walk my clients through this process with as few bumps in the road as possible. A qualified Realtor like myself will inform their clients that being pre-approved is one of the first steps in looking to purchase a home. I will help walk you through the value of pre-approval and the process of getting a loan in the Boulder Area.
The Value Of Pre Approval
Let’s start at the beginning and go over what a mortgage pre-approval is and what this means for you and your family. A mortgage pre-approval isn’t a promise that you’ll get a loan for the home you are wanting to purchase. This simply means a loan officer has looked at your finances, debt, assets, and credit history, obtained approval from one of the major lenders (ie Fannie Mae/Freddie Mac). They have determined how much money they are willing to let you borrow. This will also give you your interest rate and an estimate of the amount of your monthly mortgage payment would be. Even though a pre-approval doesn’t guarantee you’ll get a mortgage, it has many advantages.
While you might feel like this is an unnecessary step in the process of buying a home here are some examples as to why I recommend not skipping this step! It gives you confidence as a buyer in your search of homes knowing where your budget should be and what you feel confident paying a monthly amount for. Also, it helps expedite the closing process due to your information already being in the lender’s system. Finally, in a seller’s eyes having a pre-approval shows you have credibility as a buyer. Keep in mind that pre-approvals do have an expiration date. So if you don’t make the loan happen before that time frame you will have to start this process over. They typically last 60 to 90 days depending on the lender. Be sure to ask so you know this information!
What Do You Need to Get a Loan?
What information will your lender ask of you and your spouse? Every lender is a bit different in what they require. So make sure to ask your specific lender or mortgage broker what they require. This list covers most of what they will require from you which means you can be prepared and not have to get back to them with additional information.
- Driver’s License
- Social Security card or number
- If you aren’t a U.S citizen a copy of your green card
- Credit History – Check your credit score
- Employment verification 2 Years Minimum
- Recent pay stubs covering last 30 days
- W-2 forms from the last two years
- Proof of any additional income
- Two years of personal federal income tax returns (Sometimes optional)
- Last 60 Days of Bank statements for proof you can cover down payments and closing costs
- Last 60 Days of Any statements for 401K, IRA, stock accounts, or mutual funds, Sometimes your assets can be used to supplement your income.
The Types Of Home Loans/Process Of Getting A Loan
You are moving forward in the home buying process by being pre-approved and have just found your dream home. You are now ready to complete your process and apply for your loan. Let’s go over a few things you should know about your loan and the options that you have. The principle component is the amount you borrow, and the interest is what you pay to borrow the money. There are different types of loans that give you options on how to structure your interest payments to help you meet your financial needs. They will give you the option between a fixed-rate mortgage or an adjustable-rate mortgage.
Main Features of a fixed-rate mortgage-
· The unchanging interest rate on the loan
· Monthly mortgage payment will always be the same amount
Main features of an adjustable-rate mortgage
· Initial interest rate will be lower than the rate on a fixed-rate loan
· Rates adjusts periodically after the initial term expires, this can happen anywhere between 1 to 10 years
·The Monthly mortgage payment could increase or decrease based on annual adjustments to the interest rate
Deciding between what type of loan is best for you is a personal decision. You should take your time and look at both options and decide which is best for you. If you decide to go with the adjustable-rate mortgage I would recommend asking what future monthly payments would be if the rate increased just so you are prepared!
Now that you have decided on the type of home loan works best for you. Now your lender will help you decide the term or the number of years you will make the payment on your home loan. The longer the term the lower your monthly payment will be. Keep in mind with a longer-term, you will also pay more in interest over the life of the loan. Interest rates are at a nationwide low right now!
If you are in the market to buy now is the time! Interest rates are on average around 3% which is allowing the real estate market to be more dynamic. Interest rates are used to calculate your monthly mortgage payment so with them being at a record low this is huge for home loans. If you have decided to go with a fixed interest rate this rate will never change on your 30 year home loan.
More than 1.3 million homeowners have refinanced during the first three months of 2020. Everyone is taking advantage of this nationwide low. These ultra-low rates have given borrowers a chance to save money, but I have noticed that some lenders are making it more difficult to qualify for a loan. Getting the pre-approval for your loan is more important now than ever! Unfortunately, there are fewer homes on the market now than usual so demand is very high.
If you want to take advantage of the low mortgage rates I recommend you get in touch with a real estate agent quickly so you can get started looking for a home. Feel free to get in touch if you would like more information on how the market is currently doing. Or sign up for my monthly market report and I will keep you updated on what’s going on. Click here for the link to sign up!
Final Thoughts How Can I Help?
I hope you have found this article regarding the value of pre-approval and the process of getting a loan. If you are needing more information on this topic or any other real estate needs please reach out. If you are looking to sell your home and would like a Realtor to represent you, don’t hesitate to contact me. Or if you want more information on getting pre-approved and the process of getting a loan get in touch. I work with some amazing mortgage brokers and lenders and would be happy to connect you. I will continue to provide my clients with interesting and up-to-date information so they can make informed decisions. If you are planning on buying or selling a home in the near future and you think that my expertise and positive attitude might be of service to you don’t hesitate to reach out and contact me!
Or would you like more information on the Boulder area or the real estate market specifically? If so click here to download my current market report on the area or visit this link – http://elisabethnelsonrealestate.com/market-report-newsletter/
Luxury Home Specialist & New Home Specialist
Coldwell Banker Residential Brokerage
(303) 916 5859