As a real estate broker and co-owner of Austin Texas Homes, LLC, I always train my agents to get their clients pre-approved before they look at even one home. If you are a home buyer, you may be thinking to yourself, “Wow, that seems a bit harsh. Couldn’t we just look at a few places first?”
And this is why:
Imagine the following scenario, if you will. You are looking to buy your first home, having grown tired of apartment living. Perhaps you are expecting a child, or maybe you just want to stop wasting money on rent. Either way, you have decided that it’s time to find something to call your own.
You go online and fiddle around with a couple of mortgage calculators that you find on random sites. Hmmm….looks like you can qualify for a payment of $3000/month, and with your down payment, you can purchase a home for $325,000 according to the calculations. Who knew?
What better time to start looking, right? Perhaps.
At this point, there are a few different paths that your home search can take:
PATH A: You speak to an agent who agrees to show you around on Saturday without any pre-approval of any kind.
PATH B: You speak to a professional who wants you to get pre-approved with a mortgage broker before meeting (i.e. they actually know what they are doing in this business).
PATH C: You speak to no one, and decide to go it on your own.
Needless to say, Path C is incredibly foolish and the pitfalls are much more obvious, so I will focus on the first two options. If you meet with the first agent, and you fall in love with a couple of homes in the $300-325k range, what comes next?
For many buyers, the next step is to go through the perceived “hassle” of getting approved for the loan. But what if you speak to the mortgage pro, and they tell you that with much of your income coming from bonuses, it will be harder to qualify for a home in the desired range? What if you find out that your credit has some issues, and you cannot qualify at all? Simply put, mortgage guidelines have tightened up considerably over the past year or so, and many loan programs are no longer available.
Although it may seem dull or unnecessary, the pre-approval usually doesn’t take much time, and it can save you a lot of headaches. Heck, you might even end up as happy as the manic folks pictured to the left.
Don’t waste your time looking until you have taken a bit of time on the front end getting pre-approved and properly assessing your options. There are so many variables to consider, and a real estate agent and mortgage broker can help you to avoid problems down the road by giving you the straight scoop as you start the process. They may even tell you that it is unwise to spend as much as you are considering.
If you are looking to buy a brand-new home in Austin, many of the builders here will offer you an incentive to use their proprietary lender, which is fine. I know which builders are typically the best with regard to the financing programs offered, so our team can help with this.
Things are not as clear-cut as they once were. Do yourself a favor and get pre-approved before you start shopping. Believe me on this, as it will be to your advantage to do so.
Copyright 2008 Jason Crouch Austin Homes