Pre approval for first home

11 Replies

I am a brand new investor looking to buy my first property. My husband and i are still looking at different properties but we are unsure if we should get pre-approved for a loan first before making any decision since we are not sure what the approval amount will be. I know the best thing to do is to get approval from different banks to get the best option but id rather get advise from someone experienced.

HELP!

Hi @Erika Torres , I'd definitely recommend getting pre-approved first, that way you know the price range of the properties you'll be looking for. Also, be cautious with the pre-approvals, in my wife and I's case, we've always been preapproved for a value that far exceeded the value that we actually wanted to spend, so first I'd understand what portion of your monthly budget you want to spend on housing, and help drive your decision of how much you want to be pre-approved for. There are a lot of first time home buyer tools available online to help you determine that value based on your families income.

@Erika Torres I would first start out by talking to a lender or two. What that will do is let you know the amount you can spend on your investment. After that, I would get in connect with a rockstar realtor that can get you a great deal. Once you find a deal I would request a pre-approval letter from your lender with the amount you are going to offer.. Best of luck

@Erika Torres there are a lot of options available, below is an example of one https://www.nerdwallet.com/mor.... You'll want to search for a 'How Much House Can I Afford' calculator in lieu of a standard mortgage calculator. Based on your income, it'll tell you what your max house price should be, and I think this calculator uses 28% of Gross Income as the max recommended limit. Another way to look at it would be to know what your currently pay in rent per month, and then use that amount as a starting point within a mortgage calculator (for example, if you pay $1,500/month in rent, then that equates roughly to a $320K loan amount on a 30yr mortgage. Once you know your target house price, then I would shop around lenders, you can either use referrals from families and friends, or you can use online mortgage broker websites to compare rates.

Check out your local "smalls"  - credit unions, small local banks. Be prepared that if you are bound and determined to buy in the current market you could very well end up with the house appraising for less than you are offering, and would have to come up with the difference CASH (if this is a surprise, PM me for a full explanation). 

Don't trust the tender mercies of the banks to tell you what you can afford to spend. They aren't the ones that get hurt if you can't actually afford their estimates. They make TONS of money on people who buy more house than they ought to. No skin off their nose if you struggle, as long as they get their $. If they don't get paid by the month, they get made whole by the foreclosure. If the loan is insured, they get paid even if the market tanks (ever wonder why so few homeowners actually received a HARP bailout? And that's why-zero motivation for the bank to make a deal). Remember that these are the same people who would happily lend you $ at 29.9% on a CC and have you in debt for the rest of your life.



remember that these are the same people who would happily lend you $ at 29.9% if you'd go for it

@Deanna Opgenort i was aware of that 😓 how do i avoid that if the market is inflated?? I’ve been using Zillow and looking at what the houses sold for the last time they were sold to give me an idea of how much the house was worth at one point. I am in sales so i already have the mentality of bringing the boat down but there’s no way for me to know how much the appraisal will be 😳

So first of all, congratulations on not needing the explanation that what you qualify for doesn't affect what the bank will loan on a particular property - you are ahead of the game already. 

What I mean is that you need to decide for yourselves what you are comfortable spending in mortgage, rather than being pushed to getting the most expensive thing the bank will let you buy. It's OK to buy "less" than you can afford. Maybe consider a smaller, older house in a decent neighborhood that has room for an addition in the future. The smart money has always been to go for the worst house in the best neighborhood, not the best house in a worst neighborhood. 

Oh, also figure out your "why", as in "why now?" There is always a lot of pressure to buy, no matter what the market. Sometimes the best investment strategy is to not buy anything if the values aren't supported. Look up the 100 year Inflation-adjusted Case-Schiller index and check out 2006-2014. BTW, lots of real estate sites will try to only show you either the non-inflation adjusted numbers (real estate priced going ever and always up!) or they start at 2008. They make $ on you buying, and they are trying to gloss over the last market crash.  

@Erika Torres

Lots of great advice already given, esp getting a fixer upper and putting in sweat equity. Shop around for banks/lenders and know what you can comfortably pay. For as long as you make your mortgage payments, you can ride the ups and downs of the market.

Download a mortgage calculator, look up property tax records where you plan to buy, and start shopping for insurance. This will help you estimate your monthly payments.

PS. Is that you Erika?

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