Your home is likely to be one of the biggest purchases of your life, and you’ll probably need a loan to make it happen. Getting a mortgage preapproval can give you an advantage while house hunting, and it’s almost a rite of passage as you go through the process of buying a home.

By going through the preapproval process, you can show sellers that a lender has already vetted you and will lend you money. Once you’re approved, you’ll have a solid estimate that real estate agents and sellers can use to determine whether you’re a serious contender for a home.

What is a mortgage preapproval?

A mortgage preapproval is a statement, usually a document or letter, of how much money a lender is willing to let you borrow to pay for a home. It’s an important step in the home-buying process.

Buying your first home is an exciting moment, and something you worked hard to achieve.  A home is a place to build a foundation and watch your family grow.  However, it is also one of the most important financial decision you will make in your life.  Its important to be smart and not impulsive, and well-equipped to meet the responsibilities becoming a new homeowner requires.

Our housing market is currently looking good for both buyers and sellers, and Sax Wealth Advisors’ client, Michael D. Baer who leads Baer Law Group, reminds us of the top 5 essential items to consider when purchasing your new home that can save you headaches and dollars in the long run.

1. Start saving early.

         Here are the main costs to consider when saving for a new home:

• Down payment: Your down payment requirement will depend on the type of mortgage you choose and the lender.
• Closing costs: These are the fees and expenses you pay to finalize your mortgage, and they typically rangefrom 2% to 5% of the purchase price.
• Move-in expenses: You’ll need some cash after the home purchase. Set some money aside for immediate home repairs, upgrades and furnishings.

2. Decide how much you can afford and then stick to your budget.

Figure out how much you can safely spend on a house before starting to shop. A lender may offer to loan you more than what is comfortably affordable, or you may feel pressure to spend outside your comfort zone to beat another buyer’s offer. To avoid financial stress down the road, set a price range based on your budget, and then stick to it. Look at properties below your price limit to give you some wiggle room for bidding in a competitive market.

3. Check and strengthen your credit.

• Your credit score will determine whether you qualify for a mortgage and will affect the interest rate lenders will offer. Take these steps to strengthen your credit score:
• Get free copies of your credit report from each of the three credit bureaus — Experian, Equifax and TransUnion — and  dispute any errors that could hurt your score. Continue to track your credit score.
• Pay all your bills on time and keep credit card balances as low as possible.
• Keep current credit cards open. Closing a card will increase the portion of available credit you use, which can lower your  score.

4. It’s very important to hire a Title Company/ Attorney for your closing.

Not just any attorney, but an attorney that has handled numerous real estate transactions.  There are lots of things that can come up through the transaction, and there are also last-minute legal concerns that might arise regarding contract review, clear title, financing, disclosures, breach of contract, or loan documentation. Something as simple as a missing signature or having the wrong person sign can void or delay a transaction. The attorney will guide you through the entire process, from contract to closing.

5. Invest in a quality Home Inspection.

The Home Inspection should be done by a licensed home inspector, who should be able to recognize if an illegal structure exists in the property.  For instance, the bathroom may have been remodeled with a shower installed without the filing of local permits, and it violates building codes by being too small or not having the proper drainage.    If an inspector does not understand local codes and omits this from his report, the county will hold the purchaser liable until the illegal structure is reconstructed to code.  That can cost tens of thousands of dollars in construction costs, plus thousands more in daily fines until the construction is completed to code.

You can also go to the website of the local building department to see if there are any permit violations on the property.  Most buyers know that they should have a home inspection done on the property during their “contingency period” to ensure there are no defects.  Don’t simply choose the least expensive inspector, choose a company that has been in business at least 5 years. Choosing an expert, experienced home inspector to address every part of the house can save you in the long run.

For more questions on the home purchasing process, feel free to reach out to Brenda Flores at brenda@texmtglending.com or (281) 201-5429.

Down payment

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Closing costs

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Insurance

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Home inspections

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Attorneys

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Required funds

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Location

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Extra time

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Power of attorney

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Identification

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