Posted on: 29 May 2016
If you want to buy a home in a desirable area, then you may already know that homes are snatched up within a matter of months. This may mean that you need to take part in a bidding war to secure the home you truly want. If you are not prepared for this, then you are likely to lose the bid. Preparing financing is the best way to be prepared. Keep reading to learn about the things that you need to do.
Get A Preapproval
Some motivated home buyers will have cash to purchase a home. This helps to reduce closing costs and it also leads to a faster home sale. It also eliminates the possibility that a buyer will suddenly pull out of a sale due to lost financial backing.
If you cannot pay for a house in cash, you should work to get a preapproval on a house loan. This will show that you can purchase the home quickly and without any issues. Keep in mind that a preapproval is not the same as a prequalification. Prequalification simply helps to show how much you will likely be able to secure for a loan based on income. A preapproval is an approval for a loan that tells you the specific amount of money you will be given for a mortgage.
If you want to go through the preapproval process, you will need to provide a lender with proof of income as well as asset information. Verification that you are currently employed, a credit report, and personal identification information are all required for a preapproval. A loan preapproval is likely only good for a set period of time. Usually the timeframe is 90 days, so make sure to apply for the mortgage when you seriously start looking for a home.
Secure Your Down Payment
Most mortgage companies will want you to supply a fairly significant down payment when purchasing a home. If you have money saved away, then you should make sure that you have more than you need available to you. Most loan companies will require you to secure between 5% and 20% of the home price. However, you should know that a loan company will typically only supply you the money for a home based on the appraisal.
This means that you may find yourself in a difficult spot if the appraisal comes in far lower that the asking price of the home. You will need to make up the difference in cash if you still want the house. You will need to make sure that you have at least 20% or 30% of the house price in your savings account. A document stating that you have the available funds should be brought with you when negotiating for the house to show that financing is secure. Talk a realty company, like Pruitt Miller Realty Group, to begin your home search.Share