LOANS: Pre-Approval v. Pre-Qualification: What, How & When?

Getting a house loan

Let’s face it, it isn’t all that common that people can pay cash for a house.  This means they must get a loan, and that requires several factors.  Most people will jump into house hunting without knowing what to do or what to expect.  Let me start from the beginning with a couple definitions…

THE WHAT A lot of people get mixed up on whether they are pre-qualified for a loan or pre-approved, and maybe some people didn’t even know there was a difference.  Pre-qualification is the initial step you may take when first contacting a lender.  They will ask you questions and you will respond with your answers, simple.  This can even be done over the phone.  The lender’s response is what you will likely qualify for if you were to fully apply for a loan.  Pre-approval on the other hand is more in-depth digging.  In this process, the lender will require proof of what you have said by asking for several different documents.  Once the lender has everything he/she needs, then they will be able to fully approve you for your loan.

THE HOW Ready to figure out what type of loan you qualify for?  Let me take it back a step and let you know that the first step in the Home Buying Process is to find a REALTOR® to work in your best interests (if you’d like my Home Buying Process document, let me know-I am happy to share resources).  Once you’ve found yourself a real estate agent you’re comfortable with, ask them about lenders and for recommendations.  Usually agents will have several in their wheelhouse and can steer you in the right direction.  You’ll want to contact not one or two, but at least three different lenders to see who can get you the best loan terms-not every company/bank is the same.  You also want to find someone who you know will communicate well with you.  You pick your lender and then the process begins!  The lender and your real estate agent should guide you along the way.

THE WHEN Before you begin looking for a home, you’ll want to speak with lenders and find one who best suits you-as I stated above.  The key word in the previous sentence was “before“.  You do not want to jump into your home search without knowing what you qualify for.  You can assume you will be at a certain price range and be looking at things way over your real capability.  Once you move down to homes more in your price range, you may never be satisfied with what you see because you now have unrealistic expectations.  Another reason you should go to a lender before looking for homes, is so you are ready to jump on a house whenever you need to.  Usually people like to see a letter of pre-qualification or approval submitted with an offer (and sometimes they require it).  This shows the seller you are ready and have taken the necessary steps to go through with the transaction.  If you see a home you love and you don’t have a letter when some other buyer does…you may lose the house.

Hopefully this information has been beneficial and you can now relay it to your friends and family to help them out in the home buying process.  Let me know if you’re ready to take that step yourself, contact me by call or text at 502.320.7750 or by email at Cassidy.NextHome@gmail.com 🙂

FROM HOUSE TO HOME

home memories

What comes to mind when you think back to your childhood home? For me, it’s when we would have family cookouts or bike riding around the neighborhood together at my family’s home in Frankfort. One of the best things we can do for our children is to create lasting memories. These often come from family traditions that are repeated throughout their lives. Whether your children will one day come home to visit the house they grew up in, or if you are a family that will move many times during your children’s lives, repeating traditions will help reinforce memories even if the location changes.

Here are some ideas for creating memories outside of the usual holiday traditions.

1. Plan a regular activity in which everyone participates. Whether once a week, once a month, or every few months, plan an activity that the whole family is required to attend, and doesn’t involve screen time. This can be game night, a walk through the neighborhood, a family talent show, crafting days, or camping in the back yard or the living room. Get creative!

2. Decorate year-round. Seasonal decorations don’t have to be limited to major holidays, and you don’t have to break your back or the bank putting them out. It can be as simple as changing your front door wreath or front porch décor, adding a seasonal change to your fireplace mantel, or changing out place settings in the dining room. In addition to celebrating the changing seasons and major holidays, have some fun by getting creative on Cinco de Mayo, Shark Week, or National Dog Week.

3. Put on some tunes. Music helps develop children’s minds and bodies in many ways. Exposure can help them in school and may instill a lifelong love of music and an interest in playing instruments. Share your favorite songs with your children, and show an interest in theirs, by playing music during family dinners, game night, play time, or during household chores.

4. Develop a neighborhood spirit. Get to know your neighbors, and create memories for everyone, by organizing community get-togethers. You’ll make family friends and your family will remember many great times in your neighborhood. Friday afternoon porch parties, flag football or kickball games, a dog friendly block party, or a neighborhood community service project are just a few ideas for bringing people together.

5. Start a family journal. Your family journal may become a priceless treasure one day. You might start by recording something each family member is grateful for daily or weekly. Add everyone’s favorite memories from holidays or family vacations. As your children grow, let them write about the things they consider to be significant in their lives. Reading back through your family journal later on may be poignant, hilarious, or a mystery, but you won’t regret the time you spend recording your memories together.

If you are ready to start your search for a new home to make memories in, contact me. 🙂

You can find even more ideas here!

Questions You Should Ask When Buying New Construction

What to ask when buying new construction

There’s nothing like moving into a home that is truly new, with no smells, smudges or dust left behind by a previous owner. Even better is when you get to make your own custom selections. But buying from a builder is a different ball game and it’s important you know how to play. Consider these questions if you are considering new construction.

Should you use a real estate agent? I think so! The builder may have sales agents or an assistant that helps buyer’s through the process, but those people work for the builder. It’s always a good idea to have a professional advocating for you, and most builders will pay agents a commission for bringing the buyer. It’s important that your agent accompany you to the first visit to the model center or builders’ office so that representation is established.

Does the builder have a good reputation? We’ve all heard stories of builders who fail to deliver on their promises, using lower grade materials than quoted, or even disappearing before the work was completed. Check out your builder before signing anything. Find out if there are any complaints registered against them and ask for references from other homeowners. Find out if you can tour a model or a recently completed home, and bring someone who can judge the quality of the workmanship.

Should you use the builders’ lender? Many builders work with a preferred lender that offers attractive discounts on closing costs when you finance through them. It’s important to know if the lender is working as a referral or if the mortgage company is owned by the same company that is building your home. If your lender and builder both work for the same company, it’s a good idea to have an attorney review your contracts as an independent set of eyes.

What are the deed restrictions and is there an HOA? Developers usually file a subdivision’s restrictive covenants when applying for approval to build the development. Any persons buying property in the development are bound to abide by these restrictions. You can get a copy of the deed restrictions from the builder. Also ask if there is, or will be, a homeowner’s association, what the HOA fees will be and what they cover.

Can the builder charge extra for unexpected cost increases? Look over the builder’s contract carefully, or have an attorney do so, and note if there is an escalation clause that would allow the builder to pass cost increases onto you in the event that materials or labor costs increase during construction.

What warranties are provided? Normally a builder offers a warranty lasting from six months to two years, possibly longer for some items. You should know what is covered under the builder’s warranty and for how long. All the major structural items and mechanical systems are usually covered. Appliances are not, but they should come with a manufacturer’s warranty. Damage from weather, shrinkage or expansion of the home or foundation, and anything resulting from the homeowner’s failure to provide maintenance or from work done on the home after construction is not covered.

What is the timeline for completion? This will depend on whether the build is a production home, meaning the builder is building select models throughout a development, or if you have hired the builder to build a custom home. Production homes can be completed in three to four months, where custom homes usually take a minimum of six months. Regardless, the builder should be able to give you a timeline outlining each phase of construction. Factors affecting the timeline include weather, delays receiving building supplies, or the number of changes you make along the way.

Can you choose different finishes or colors? Again, it depends on the type of build. Certainly, if you are building a custom home, you can make as many changes as you are willing to pay for. But if the home is part of a development and the builder has color palettes and finishes chosen, there may be a limit to how much you can change. Often the builder will allow you to change paint colors, flooring, fixtures, tile or appliances, as long as what you choose is in line with the budget he set, and those items have not already been ordered.

Can you get a credit if you buy your own appliances? If you already own your own appliances or prefer to choose something different from the builder’s choice, ask if you can be credited back the amount he had budgeted to pay for those items.

Is landscaping included? It’s no fun to get to the end of construction and find out there is no budget for landscaping. Find out what the builder plans to put in in terms of grass, trees, and shrubbery. You may want to make additions or changes to his landscape plan.

The Importance of Pre-Approval

home calculator

A lot of people looking for real estate to buy do not know the importance of getting pre-approved for a loan BEFORE they begin looking for a property.  Here are a few things to consider:

  1. You could lose out on a home you love.  Especially when it is a seller’s market–like it is currently–you could lose a home you really liked because you did not have your pre-approval letter while someone else had theirs.
  2. It adds leverage to your offer.  When submitted the pre-approval letter with your offer right off of the bat, they see that you are serious about your offer and that you are good for the money you are offering.  Put yourself in the sellers’ shoes–would you want to accept an offer that you weren’t certain they could really give you?
  3. It shows what price range you are comfortable with financially.  If you are out searching for homes and you do not know your price range that is determined by a lender, you are truly doing yourself a disservice.  You not only would be wasting your time if you were in the wrong range, but you could be seeing homes that are totally above your price point.  In this case, once you begin seeing homes you can afford you will only be able to compare it to the nicer homes you saw at a higher price point, which can make it quite difficult to find something you’re happy with.

So, just do the research or ask your REALTOR® for recommendations on lenders.  Find one you are comfortable with.  Ask for a pre-approval letter.  Find a property!