Loans, Interest Rates And The Approval Process When Purchasing A Home

Learning to understand the process of buying a Houston home can be a little over whelming, especially to a first time buyer. The biggest and most expensive purchase most of us will ever make is the purchase of a home, so it really pays to spend some time learning about interest rates, loans and the approval process in general, as well as understanding your specific needs and your specific real estate market.

It is a great idea to get pre-approved for financing because this approval will be a real indicator of what you can afford. What is a pre-approval?

In lending, pre-approval has two meanings:

The first is that a lender, via public or proprietary information, feels that a potential borrower is completely credit worthy enough for a certain credit product, and approaches the potential customer with a guarantee that should they want that product, they would be guaranteed to get it. This rarely happens in the financial services industry, and when it does happen, it is usually loaded with fine print that is not immediately disclosed. Usually, what happens is pre-qualification, instead.

Although, to a typical consumer, "you're pre-approved" means "you already passed the approval process and therefore are guaranteed to be immediately granted the loan if you apply," the literal meaning is different. The literal meaning is "at a stage before approval." Thus, pre-approved creates no obligation whatsoever on the lender and no rights whatsoever to the potential borrower. "Pre-approved" is thus a popular advertising catch phrase to induce people to apply for a loan.

The second meaning relates to mortgage lending. People interested in buying a house can often approach a lender, who will check their credit history and verify their income, and then can provide assurances they would be able to get a loan up to a certain amount. This pre approval can then help a buyer find a home that is within their loan amount range. Buyers can ask for a letter of pre approval from the lender, and when shopping for a home can have possibly an advantage over others because they can show the seller that they are more likely to be able to buy the house. Often real estate agents prefer to work with a buyer who has a pre approval as it demonstrates that they are well-qualified to receive financing and are serious about buying a home. A pre approval is based on the documentation the borrower supplies at the time of application, and any actual eligibility to receive the pre approved loan depends on the terms and conditions of the pre approval and ability to secure the loan before the pre approval expires.

This is the very beginning of learning and working through the loan application/approval process so you need to be honest. Do not overstate income, or employment. Do not buy for someone else. And don't sign any blank documents. Be honest about your intent to occupy and be accurate about your level of debt. And finally, read and understand everything before you sign.

If you need additional help my team and I at Innovative Realty Group can assist you if you are ready to purchase a Houston home. Call us at 281-326-HOME and please visit our website at www.DavidTheLocator.com. We look forward to assisting you in this next step of your journey!