Two Different Approvals
Did you know that there are actually two different approval processes in place when purchasing a home?
The first is the buyer approval. The second is the property approval.
Let’s talk about it and see why it matters.
In order to get to closing, a buyer must be approved, especially if they are taking out a loan to purchase the home. Many things can be by-passed if you are using cash but a vast majority of people get a loan to purchase a house.
The buyer approval comes in the form of credit checks, credit scores, IRS documents, Tax returns, proof of employment, and things like bank account balances. I’ve posted before about the three types of pre-approvals. There is the pre-qualification letter, the pre-approval notice, and the pre-underwritten status.
Each of these has a different meaning and a different level of comfort for the seller considering your offer. We highly recommend getting pre-underwritten so that all we are waiting on is the property.
Don’t Screw Up!
Getting approved is a great start to your home search but too many times, people get careless. Once you are approved, it is vitally important not to do certain things.
Don’t do any of the following:
- Buy a new car
- Buy new appliances
- Open or close credit accounts (you can still pay it off or down)
- Don’t open or close bank accounts
- Co-signing a loan for someone else
You get the idea. Here’s the thing. If you were to do one of the above while you were trying to get to closing, you could run into issues.
By changing your credit status, there is the possibility that you will no longer be qualified to get the loan. Maybe your debt-to-income ratio changes and now you don’t qualify.
The thing to keep in mind is that there is an additional credit check of everything about three days before closing.
Don’t mess the whole process up by buying that refrigerator for the new house before you are actually in the house. It really doesn’t take that long to get a refrigerator delivered to your house after closing.
Think it doesn’t happen? Actually, it happens more often than you think.
You have found the house you want and you have been pre-underwritten for the purchase. However, you are not done yet. The property still needs to be approved. After all, the lender wants to protect their investment since they are on the hook for the loan amount until it is paid.
Here is where the inspections come in. As you go through the purchase process, it’s highly recommended that you have a legitimate home inspection done on the property.
Wouldn’t it be terrible if you purchased a home and found out later that it needed foundation work? A home inspection will reasonably find major issues with the house. Electrical, Plumbing, and Structural issues will be brought up so that repairs can take place prior to closing on the home. Even those who are paying cash should have a home inspection. The relatively low cost of having an inspection far outweighs the cost of repairs later. It also helps protect your investment in your home. This is why you got an option period to begin with. Don’t know what an option period is? No worries. I’ll cover that in my next post.
If you need help with the purchase or sale of a home, reach out to me for more information about how I can help you get where you want to be.
I’m never too busy for your referrals.
Patrick O’Connor – CHMS, GRI, Realtor
Ebby Halliday, REALTORS