Planning on Buying a NJ Home? Start Here 👇

Life Stages & Home Choices: A Guide to Finding Your Perfect Home

THE TRUTH About BUYING A House You Cannot AFFORD?!?

Buyer Closing Costs: ~1.5-2.5% of Sales price

🗓️When should I get pre-approved to buy a house? Answer: 1 Month Before Shopping

When Should I Get Pre Approved To Buy A House?

1. Pre-Approval Timing: Get pre-approved about a month before you plan to start house shopping. This timing allows for document gathering and potential assistance in selecting a real estate agent. Avoid getting pre-approved too early to ensure credit checks and guidelines are current.
2. File Review and Underwriting: Allow extra time if your financial situation is complex (e.g., self-employed, manual underwrite for VA/FHA, varying hourly work). Complex files may require full underwriting before making offers, which can take up to 10 business days.
3. Long-Term Planning and Credit Checks: Engage with a lender for planning several years in advance, but avoid credit checks until about 30 days before house shopping. Rates, guidelines, and personal financial circumstances can change significantly over longer periods.

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Understanding Mortgage Insurance

📄Pre-Approval vs. Pre-Qualification

Pre-Approvals are usually good for 90 days from the initial application date, not from when the file is approved, but your credit report is good for 120 days. The pre-approval is very easy for a lender to update without starting from scratch. Be cautious of lenders who run your credit without permission, as it can negatively impact your credit score.

Mortgage Pre Approval Process (Step by Step Guide)

How Long Is My Pre-Approval Letter Good For? ~90 Days

Different Types of Pre-Approvals

"Instant" Mortgage Preapprovals Can Get You DENIED

1. Standard Pre-Qualification

   • It's a basic evaluation where lenders estimate your borrowing capacity based on self-reported financial information.
   • Requires no formal documentation and is not as robust or reliable as a pre-approval.

2. Regular Pre-Approval

   1. Involves a thorough review of your financial documents and credit check.

      Documents Needed for Mortgage Pre-Approval

      How Mortgage Lenders Look At Your Credit

      First Time Home Buyers: Pre-Approval Alert

   2. Lenders provide a pre-approval letter stating how much they are willing to lend.

   3. It is more concrete than pre-qualification and is a strong indicator of your purchasing ability.

3. Fully Underwritten Pre-Approval

   1. Goes a step further than regular pre-approval.
   2. Your financial documents are not only reviewed but also passed through underwriting, making this the most robust form of pre-approval.
   3. As offered by Jennifer Beeston at Guaranteed Rate, it's akin to having a conditional loan commitment in hand, making your offer as strong as a cash offer.

   In a seller’s market, see if you can get a Fully Underwritten Pre-Approval or “credit approved” before you go house hunting, to both strengthen your offers and get a big jump start on the mortgage process.

   Every time you make an offer on a property, you’ll need to submit a mortgage pre-approval letter from a reputable lender along with your written offer, as a baseline assurance to the Seller that you can obtain the funds you’ll need to pay for the property at closing.  But pre-approvals aren’t the same as getting actual loan approval (i.e., a mortgage commitment), since they don’t undergo the rigorous scrutiny of true underwriting; instead, they’re generated through an automated underwriting system.

   And because all bidders will be submitting a pre-approval, there’s nothing about your pre-approval that will make you stand out in a bidding war situation.  (“Pre-qualification” letters are even easier to obtain than pre-approvals, since they are based on the buyer’s credit score and only verbal statements of financial means to the lender, without any supporting documentation.)

   A credit approval, on the other hand, raises the ante significantly.  A credit approval is given to you by a lender when you’ve verified income, employment, debts and assets with actual documentation, and your credit history/profile has undergone the rigorous financial scrutiny of underwriting, just as it would during the typical mortgage application process that happens after a contract has been formed.  The lender determines that you’re approved for a loan up to a certain amount, subject to a satisfactory appraisal, basically telling the Seller that you’re just one step — one appraisal — away from a mortgage commitment and also that you’re a serious, proactive buyer looking to move through the purchase process quickly and efficiently.

Understanding Same-Day Mortgages

1. As explained by Jennifer Beeston, the same-day mortgage significantly accelerates the loan process, offering 10 to 12-day closes.

   Same-Day Mortgages Explained

2. It's crucial to note that "same-day" refers to the speed of processing after receiving all your documents, not that the entire process happens in one day.

3. This rapid process includes fast underwriting and approval on the same day the documents are received, provided they are submitted by the designated time (usually 1 PM Central).

4. Same-day mortgages are currently available for conventional loans and are being developed for jumbo, FHA, and VA loans.

5. They offer a significant advantage in competitive markets, making your offer more appealing to sellers who might prioritize faster closing.

Steps to Getting Pre-Approved

1. Assess Your Finances
   • Calculate your budget, considering income, expenses, down payment, and additional costs like property taxes and homeowner's insurance.
   • Be realistic about what you can afford, keeping in mind New Jersey's cost of living and property taxes.
2. Gather Documentation
   • Prepare necessary financial documents for submission. This includes income verification, tax returns, bank statements, and more.
3. Choose the Right Lender
   • Consider lenders like Jennifer Beeston, who offer robust pre-approval options, including fully underwritten pre-approvals and same-day mortgages.
4. Submit Your Application
   • Complete the lender's application process and submit your financial documents.
5. Receive Pre-Approval
   • Obtain your pre-approval or fully underwritten pre-approval letter, which makes you a serious contender in the NJ real estate market.
6. Maintain Financial Stability
   • Post pre-approval, avoid major purchases or changes in your financial situation to ensure your loan eligibility remains intact.

Benefits of Fully Underwritten Pre-Approvals and Same-Day Mortgages

1. Strength of Offer: A fully underwritten pre-approval is as close to cash as you can get, making your offer very attractive to sellers.
2. Speed: With same-day mortgages, the ability to close quickly can be a decisive factor in a competitive market.
3. Reduced Stress: Accelerated processes reduce the period of uncertainty that accompanies home buying.

⏰Start Early & Be Prepared for a Timeline:

1. Starting the pre-approval process early is key. Aim to get pre-approved about 2-6 months before you plan to purchase.
2. This timeline accounts for the potential of losing out on offers and the current reality of low inventory which may prolong the home search.
3. Being pre-approved well in advance will make you ready to act quickly when you find the right home.

❌Mortgage Lender Red Flags | See Video

1. Lack of Closing Cost Estimate Breakdown: One of the major red flags is when a lender provides you with a pre-approval letter but doesn't give you a detailed breakdown of closing costs. This is crucial information for your homebuying process, and if they're not willing to provide it, it's a cause for concern.
2. Failure to Explain the Details: In addition to receiving the closing cost estimate, the lender should be willing to go through it with you, explaining what each cost entails and how it affects your overall expenses. If they avoid explaining these details, it raises questions about their commitment to your best interests.
3. Lazy or Inattentive Behavior: If the lender appears lazy or inattentive in the early stages of your interactions, it's a sign that they might not put in the effort required throughout the entire process. This can lead to issues later on, such as missed opportunities for better rates or terms.
4. Lack of Transparency: A red flag is raised if the lender is not transparent about fees, interest rates, and the impact of changes in the market on your qualification. Transparency is essential to ensure you have a clear understanding of your financial commitment.

✅Post Pre-Approval Best Practices:

Financial Stability:

• Avoid making significant purchases, job changes, or credit inquiries that could impact your credit score and loan eligibility.

Regular Check-Ins:

• Stay in touch with your lender to update any information and get advice as needed.

Readiness to Act:

• Be prepared to make an offer as soon as you find a suitable property.

Keep an Eye on Expiration:

• Pre-approval letters have an expiry date, usually within 60 to 90 days, so keep track of this timeline.

Next Step:

Set up Property Alerts & See Homes

More Resources:

What is an Appraisal

Appraisal Gap: What Buyers Need To Know

Earnest Money vs Deposit vs Down Payment

For Investors: Understanding Your Budget 💼🏢

Refinances

FHA Loans

Are Mortgage Lenders Charging Uninformed Homebuyers More?