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You want to buy a home, but you don’t where to start. Most people start looking for a home online, at open houses, at model homes, etc. The thought of buying a home can lead to excitement as well as anxiety, because you may not know what next steps to take. You should consult your Realtor and ask them for at least three lender referrals that they can recommend. It’s also wise to ask friends if they want to recommend any lender. Speak with all the lenders on your list to see which one you feel the most comfortable with. Often lenders offer similar programs so you are really looking for a lender that you feel comfortable entrusting, and will work hard and communicate with you the way you want to be communicated with through this process. Lenders use debt to income (DTI) formulas to determine your loan amount. It’s wise to use that number as a guide, because only you truly know in reality what you can afford. Your lender will ask you several questions regarding your finances or ask you to fill out a loan application to determine what amount you “Qualify” for. This is referred to as a “Pre-Qualification.” The seller will ask you to submit your “Pre-Qualification Letter” (PQL) with any offer to purchase their property. Once your offer is accepted, your lender will take you to the next step of the loan process which is the loan “Approval.” At this step you will be asked to prove your income and prove your assets in order to be approved for the loan.
The “Pre-Qualified” is the first step and the “Pre-Approved” is basically the last step of the loan process. If a seller is faced with two competing offers, they are more apt to accept the buyer’s offer that is “pre-approved” over the buyer who is merely “pre-qualified.” This puts the buyer in a more advantageous position in the buying process which can get you the home you want and more important, the terms you want.