What to do when you know you're ready to buy a house

The first article in this series asked some important questions:  Are you really ready to buy a home? Do you know what you want? Is your credit in good shape, and do you have the cash you need to see a transaction through to closing? All right, you’ve answered those questions and now you should start looking at homes…right?

Hold on to that enthusiasm just a bit longer and take one more step that will make the whole process of finding and buying your dream home a lot easier. 

If you are like most people, you don’t have a big bundle of cash sitting around. You will need a loan to help you buy that house. These days, just about anyone can get a loan if they are willing to pay high interest rates. The idea is to find a loan that is right for you, one that has the best possible terms and the lowest cost. And the best time to find such a loan is before you need it, and here are three good reasons why:

1.      If you find a loan before you need it, you can take the time to search and compare. We all make better decisions if we are not rushed by emotion or circumstance into agreeing with the first deal that comes along.

2.      When you know what you can borrow – what amount you will be approved for, and what you can comfortably pay back – then you know what price range of house to look for. This avoids time and energy wasted looking at houses you cannot afford.

3.      When you do make an offer on a house, having a loan preapproval in your pocket places you in a stronger position if there are competitive offers. You will be able to show the seller that your offer is solid because you will have already met the usual requirement that you apply for financing within a few days of the contract.

"Preapproval" means that a loan officer has reviewed your financial information and credit, and believes you can qualify for a loan of a given amount. The lender provides a preapproval letter that shows your borrowing power. This is not a final loan commitment – that will also depend on the house you choose and its appraisal. But it does prove to your real estate agent and the seller that you have the financial ability to make a deal.

Your Realtor® will be able to help you with identifying potential lenders and mortgage brokers. There are many different kinds of loans and programs that help borrowers to buy a home. The loan officer will be able to suggest what program might be best for your situation. Some states have programs that help first-time buyers, and repeat purchasers might want to consider a different loan term than the traditional 30 years. 

You’ve been patient, and now it’s finally your turn. Come back next time when we’ll talk about what you’ve been waiting for…actually looking at houses!

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