For homebuyers about to start the process, real estate agents will say the first step is to contact a lender to get prequalified.
Getting prequalified for a home loan followed by preapproval, allows buyers to find out if they can actually buy a house, how much house they can afford and what loans are available to them. It also shows Realtors and sellers that the buyers are serious.
Vanya Griffith-Mayes, branch manager of Starkey Mortgage in Sherman, said with the local real estate market geared for sellers, buyers need to be ready to make an offer when they find the house they want.
“So if they go out and find a home that they really, really like, they would need to be able to be in a position to present an offer quickly,” Griffith-Mayes said. “If they don’t have a prequalification letter in hand, then if they find a house they love, they’re not going to be in a position to make that offer and they would lose that house.”
Often real estate agents won’t show houses until the buyers are prequalified as they don’t know what the buyers can afford and if they can get a loan.
“And a lot of time the Realtors don’t want to spend the entire afternoon working with a client that’s not qualified,” Griffith-Mayes said. “If somebody is not qualified — they have credit issues, or they can’t qualify for a home loan or they don’t have cash in hand — a Realtor needs to spend time with somebody who is qualified.”
Jeremy Lewis, branch manager of Grayson Home Loans, said buyers first need to fill out an application. Most local lenders, like Lewis, have applications available on their websites. He noted it typically takes about two to three minutes per person to fill out the form, and it covers the basic information like their name, social security number, income, assets, work history for the past two years and where they have lived for the past two years.
“And then I’ll take a look at the credit and that helps me determine what type of loan works best for them by looking at their credit scores, and then I’ll kind of consult with them,” Lewis said. “After I look at their credit, I’ll have a little consultation with them to figure out what their goals are, price range of house, payment range of house, and the down payment that they’re looking at being able to come up with.”
Griffith-Mayes said prequalification and preapproval are different. For the latter, the lender verifies the information. She said for prequalifications the lender takes only verbal information and has not examined the related documents like tax returns, bank statements and pay stubs.
“Preapproval means that the lender has actually reviewed the written documentation, has underwritten the file and verified that they make the money they say they make, and they have the assets in the bank that they say that they have, so that’s the difference between preapproval and prequalification,” Griffith-Mayes said.
With preapproval, Lewis said it limits the potential of surprises and hurdles. When buyers fill out the initial applications, everything could look good, but the documentation could paint a different picture. So with a preapproval, it ensures that buyers are good to purchase a house and that their offers are backed up with proof.
“So I like to make sure that I’m 95 percent sure that everything is good on the loan before we go in and start looking at homes,” Lewis said. “Because I don’t want to be the bad guy that has to come back and tell them, ‘Hey, I know you made an offer on this house, it’s been accepted — you told your friends and your family, everybody’s pumped up about buying the house — but we got an issue.’”
Griffith-Mayes said by the preapproval and prequalification process, it allows buyers see what loans they can qualify for, which could limit or open up home options. Some loans have strict requirements on the state of the house while others may not.
Preapproval, Lewis said, also helps speed up the buying process as it helps the loan close much faster after the buyers make that offer.
“So by being proactive, and having those materials ahead of time so I can look at them — that helps them ensure that they’re going to get the house, and they’re not going to run into any roadblocks,” Lewis said. “On top of that, it helps speed the process up as well. It helps them get into the house much faster, and it makes it easier on them as a buyer — through the loan process — and on the lender as well.”