You probably already plan on finding a trusted real estate agent before you begin shopping for your next home. But did you know it’s also a good idea to begin working with a lender early on in the process, too?
Developing a relationship with a lender before you begin bidding on homes will help you best understand how much you can afford. What’s more, it will also position you as a strong buyer, which is especially important in hot real estate markets across the country.
Here are three reasons you should work with a lender before shopping for a home:
1. A lender can help you stand out as a strong buyer
When sellers in competitive markets are considering offers, they want to go with the buyers who are most likely to get to the closing table—and do so quickly. When a deal falls through because a buyer’s financing falls through, the process restarts and the “for sale” home sits on the market longer.
Knowing this, you can stand out amongst the competition by working with a lender early on in the process.
Consider an upfront underwrite
To strengthen your offer further, you could go so far as to get underwritten upfront. When you’re underwritten in advance, sellers can be more confident that your financing will come through.
That’s because you’ve got a lender who has already assessed your financials and expressed a willingness to grant you a mortgage. An upfront underwrite can even help you compete with all-cash offers.
Don’t wait to get a pre-approval
At the very least, though, you’ll want to enter the market with a pre-approval letter. While they may sound synonymous, pre-qualifications and pre-approvals do differ.
A pre-qualification is often given from buyers’ self-reported financial information, including salary and credit score. But it’s not actually vetted at this point, so it doesn’t carry much weight.
A pre-approval is a conditional loan approval issued before you identify a property to purchase but after a lender verifies your financials and evaluates your credit. A pre-approval is generally stronger, and will help make your home offer more competitive.
2. A lender can help you best understand what you can afford
Unexpected costs and high mortgage payments are a few of the most common reasons homeowners regret buying their homes. Working with a lender before you start your search can help you avoid getting in over your head.
Your lender will help run the numbers so you can be confident you’re looking for homes that are comfortably within your budget.
3. A lender can help you get the best interest rates
Establishing and maintaining a strong credit score is imperative when it comes to getting the best interest rate on a mortgage. When your lender is evaluating your financials, they may be able to detect any issues that could be keeping you from getting the best rate.
For example, if your credit card usage is more than 30%, paying down a credit card before you go through the approval process might just give your score the bump it needs to get the best rate possible.
Also, your lender will be able to caution you against moves that might affect your approval or interest rate, including opening up new loans or lines of credit while you’re house hunting.
Remember: Your lender is meant to be your partner in buying a home, so find one you can trust. A good mortgage company will do everything possible to get you into the home of your dreams, while protecting your hard earned money.
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