Mortgage Loan Prequalification or Preapproval ?

We have a guess post blog this week by Andrew Hill @ NewHome Source  written about Prequalifing for your mortgage loan.  I want to point out that terminology differentiates in different parts of the country.  So to eliminate confusion, I just want to point out that there is a difference between prequalification and a preapproval.  A prequalification is not always a preapproval, because a preapproval only occurs after your mortgage company receives and verified your documents that back up the information you provided to them about your income, assets, liabilities and job experience.  When you punch in answers to a set of questions online and are given a mortgage prequalification, this is not going to hold a lot of weight when it comes time to put in an offer to buy a home.  Please be sure you are working with a qualified Realtor who has a valid Preapproval Letter waiting for you!

Prequalification: What is it & Why does it Matter?

By Andrew Hill @ www.newhomesource.com

So you’ve decided you’re ready to buy a home. Congratulations! Whether you’re a first time buyer or an expert in real estate, the first thing you’ll want to do it get prequalified for a home loan. You probably have heard this term before, but what exactly does it mean to ‘prequalify’? In short, pre-qualification is an assurance by the lender, which determines the highest loan amount that you qualify for.

Why should you prequalify? For starters, it saves you time and money. Buyers who are pre-qualified are able to consult better realtors and thus receive better service. Pre-qualified buyers are also given preference in multiple-offer situations and can negotiate for a better price than those who haven’t been prequalified.

Given these benefits, you may be asking yourself, “How can I get prequalified?”

In order to do prequalify, you’ll need:

1.      Credit reports

2.      Online mortgage/finance services

3.      A lender

The process essentially consists of you and a lender (or a mortgage broker) looking over your credit history and your debt to income ratio, for which you’ll need to provide your gross monthly income and total monthly payments. Depending on your unique situation, the lender you’re working with may ask for other documentation and information regarding your finances.

In order for you and the lender to look over your financial background and current situation, you’ll need to give your lender authorization to pull your credit report. After your information has been evaluated, the lender will construct a letter of prequalification for you, which states that they have reviewed your credit and financial information.

With this little letter in hand, you’ll be that much closer to finding the home of your dreams.

Tips:

-To find a good lender, ask for a referral from a trusted relative, friend, or co-worker.

-Prequalification is usually a free service. If the lender tried to charge you, find a different lender. 

-You don’t have to do business with the lender that prequalifies you. Shop around, compare rates, and choose the lender who has the best offer.

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Home Buying Process For FHA Homes & First Time Homebuyers

The following information is meant to help Buyers understand financing using FHA and is provided to us using information directly from one of HUD's Management Companies, HomeTelos First.  Their website info is given below.

FHA offers 1-to-4 unit residential properties HUD acquires as a result of a foreclosure action on an FHA-insured mortgage. FHA then becomes the property owner and offers homes for sale at consumer-friendly prices to recover the loss on the foreclosure claim.

You must have a Real Estate Agent to submit your offer. Any real estate broker registered with FHA may submit your offer and contract to purchase on your behalf. FHA will pay your real estate broker's commission using proceeds from the property sale.

FHA's homes are offered for sale at fair market value, based on a recent appraisal. Generally, FHA sells homes in what is known as an "Offer Period," during which a potential buyer's offer must be made. At the end of the Offer Period, all offers are opened and the bid providing the highest acceptable net return to FHA may then be accepted. Following the initial "Offer Period" homes remaining unsold are offered on an "extended" basis which means offers may be submitted any business day. If a bid on one of these homes is acceptable, the broker will usually be notified within 48 hours of FHA's acceptance of the offer.

Understanding HUD Properties and Financing Where do FHA properties come from? FHA, or the Federal Housing Administration, is part of the Federal Government's Department of Housing and                                                          Urban Development (HUD). FHA helps home buyers qualify for mortgage financing by offering lenders insurance against  home buyer default. When a home buyer defaults on an FHA insured mortgage, the lender may foreclose and take ownership of the home. The  lender then transfers ownership of the home to FHA in exchange for FHA paying the lender the balance that was due on the  mortgage. FHA sells tens of thousands of foreclosed properties each year using the expertise of industry experts such as  HomeTelos. If I want to buy a HUD property, can I use an FHA loan to buy the home? Yes! Your lender still needs to qualify you for an FHA insured loan. Remember, FHA does not make loans directly to homebuyers. You must go through your lender. However, FHA financing is not required. Your lender can guide you through available financing programs, including FHA. Does getting an FHA-insured mortgage help in buying a HUD Home? HUD may have more attractive downpayment terms on an FHA mortgage if a borrower is buying a HUD home. Check with your real estate broker regarding special terms or homebuyer incentives. Can HUD help if the property I am buying needs some repairs? Through the FHA, HUD offers Property Rehabilitation Mortgage Insurance, also known as a "203k loan". In this program a lender sets aside part of your mortgage in a repair escrow, which you can draw on to make needed repairs. Talk to your lender about FHA 203k loans, and if one is right for you. For more information on HUD Properties go to HUD's website at  http://www.neighborhoodlink.com/article/Homeowner/How_To_Buy_A_HUD_Home. For more information on HUD/FHA Properties go to: http://www.hud.gov/offices/hsg/sfh/ins/203b--df.cfm. For specific information on FHA Property Rehabilation Mortgage insurance Program, go to:  http://www.hud.gov/offices/hsg/sfh/203k/203kmenu.cfm. To find a specific FHA approved lender in your area, go to: http://www.hud.gov/ll/code/llslcrit.cfm.

	FHA's 9-step process for first-time buyers For first-time home buyers, there is a huge amount of information and guidance available. Sorting it out, and making sure that it is objective can be challenging.  Make sure you work with a Realtor you are comfortable with to help you and use the following guidelines.   FHA provides the best guidance in this area centered around 9 steps any soon-to-be homeowner should take. HomeTelosFIRST provides the information below that will guide you through these 9 steps, and give you plenty of support along the way. It may be surprising to you, but most homebuyers find their homes through the Internet. Feel free to start your journey by selecting homes currently available in your area, using the How To Search For A Home feature on the HomeTelosFIRST Homepage. The steps below can help you to refine your choice, and better help to smooth the road to buying the home that best meets your needs. Step 1. Figure out how much you can afford. To help you calculate how much you can afford to buy a home, FHA recommends you use models operated by Ginnie Mae, like FHA a part of HUD that supports mortgage financing. To get an answer to just how much you can afford, click on http://www.ginniemae.gov/2_prequal/intro_questions.asp?Section=YPTH Step 2. Should you rent or buy? Is this the right time financially for you to by? To see what works best for you financially, click on http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH Step 3. Know your rights. You need to make sure you receive the information you are entitled to along your road to homeownership. You have the Right to.. Shop for the best loan for you and compare the charges of different mortgage brokers and lenders. Ask for a Good Faith Estimate of all loan and settlement charges from your lender before you agree to the loan and pay any fees. Know what fees are not refundable if you decide to cancel the loan agreement. Ask your mortgage broker to explain exactly what the mortgage broker will do for you. Know how much the mortgage broker is getting paid by you and the lender for your loan. Ask questions about charges and loan terms that you do not understand. Receive a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance. Know the reason if your loan was turned down. Ask for the HUD settlement cost booklet "Shopping for Your Home Loan" from your lender. Step 4. Shop for a loan. To find a lender and loan terms that best meet your needs, you should learn some of the terminology used, what can help you, and what can cost you. To help guide you in shopping for the right loan, check out this HUD booklet by clicking http://www.hud.gov/buying/booklet.pdf Would you comparison shop in only one store? To find mortgage lenders doing business in your area that are approved by FHA, go to http://www.hud.gov/ll/code/llslcrit.cfm Step 5. Check out Home-buying Programs Your lender usually knows about any local programs offered to first time homebuyers, but it is always good to check for yourself. One avenue to do so is to see what programs have been identified by local HUD offices. Click here to see what might be available in your state:http://www.hud.gov/buying/localbuying.cfm Step 6. Finding a qualified real estate agent to help you buy your home Nearly 75% of today's home are found and purchased through the Internet. This does not eliminate the need for you to select a qualified real estate agent to represent you. A qualified real estate agent provides the best security for any buyer in ensuring a great home purchase. You should expect your agent to: Develop a preliminary evaluation of a property (including both pros and cons) and provide an explanation of comparative property values in the area. Properly advise you on price and other advantageous negotiating options and prepare a purchase offer. Make a timely and complete offer on the home you are interested in buying. Notify you immediately regarding offer acceptance, offer rejection, or counter offers. Arrange inspections, warranties, and any certifications that might affect the value of the property. Accompany you on a final walk-through of the property before closing. Attend the closing and provide assistance to you and your attorney at the closing. Remember, your real estate agent can guide you, but only you know the home that is right for you. To locate a real estate agent in your area, click here to find agents you may wish to represent you: Find An Agent Step 7. Get a Home Inspection What you see may be what you get, but what about what you don't see? It pays to engage the trained eyes of a home inspector to make sure you fully understand the condition of the property you are buying. To learn more about home inspections, check out the information at this site:http://www.pueblo.gsa.gov/cic_text/housing/inspection/home.htm Step 8: Obtaining homeowners insurance Homeowners insurance is more than just a good idea. Your lender will require that you carry sufficient coverage to at least pay off your mortgage amount if your home were severely damaged. To get some background on what to look for in a homeowners insurance policy, clickhttp://consumeraction.gov/caw_insurance_homeowner_renter.shtml Step 9. Closing One of the most exciting moments of your life is actually closing on the purchase of your new home. To understand the process and remove stress from the event, try reading some background information provided at this website: http://www.hud.gov/offices/hsg/ramh/res/sfhrestc.cfm Congratulations, you made it through the 9 steps! The materials referenced along the way are not the only sources of information for you.  Always work with your Real Estate Agent to guide you through this process and give you more resources/ information. Find out more on HomeTelosFIRST Homepage @ www.hometelosfirst.com

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