How to Buy a Home | Part 1 – Getting Pre-Approved

March 27, 2019

Buying a house can be intimidating so I’ll walk you through step by step what you need to do to buy a house. In this video, I discuss going to meet with a loan officer to get pre-approved for the purchase amount of your home.

 

Transcription:

Hey everyone, it’s Andrea Lutz and I’m here to talk to you about how to buy a house. Now when it comes to buying a home, there are a lot of steps to take but without a doubt most people agree the first step is to get pre-approved with a loan officer. So go around and talk to some of your family, talk to your friends and find out who they worked with in the past who they really trust. You’re looking for someone whose local. That is so important. People will go online and they find these people that will give them a pre-qualification letter same day. Well, really the best thing you can do is find someone who lives in the town where you’re buying your house, find someone who has the market knowledge in that area and somebody you can go and meet face to face. That’s a big deal.

So get some questions asked, find out who those two or three people are that people say are really, really great and then give them a call and make an appointment. The second thing you’re gonna do after you find those couple loan officers that you really want to meet is gather the documents that you’re gonna need to have that first meeting. So it really depends on the bank what kind of documents you’re gonna need when you go and meet with your loan officer. But some of the things that most banks are going to require are the last couple years of tax returns, the last couple years of W2s, some recent pay stubs. They’re also gonna wanna see some bank statements to see what kind of money you have saved away. Now, if you have other investments, that’ll also come into play. So bring all that into them so they can review it with you.

The third thing you’re really gonna wanna do is really think hard about what is a reasonable amount of money to put in every month to your house. Now, people skip this step. They go in, they talk to the loan officer, the loan officer says, “Congratulations, you can get a house for $200,000.” And then they go and buy and guess what? It’s too much, it’s just too much and it makes them uncomfortable and then they feel like, “Ah, we can’t do any improvements. I can’t buy that car in need now,” and all of that. So, just really sit down and think, if you’re buying the house by yourself, take some time and sit by yourself. If you’re buying it with a spouse or a partner or a friend or a family member, sit down with them and have open, honest conversation about exactly what feels right to you for that payment.

Now, don’t forget, you’re also gonna have taxes to pay, you’re gonna have insurance on that home and you’re also gonna have improvements, right? I mean rarely is somebody gonna own a home for five years and not put money into it. So make sure that you have money saved aside for fixing the roof, getting that new refrigerator that gets bummed out or new carpet in the bedroom, those sorts of things. Don’t forget, that unlike having a rental, these things are gonna be your expense going forward. So now that you’ve got that good conversation going and you kind of have a good idea of what you’re gonna feel comfortable paying and you know who you’re gonna meet and you’ve got all the documents pulled together, go on and meet that loan officer. Go in person, sit down with them face to face and find out, do you feel comfortable with this person? Are they open and honest? Are they giving you the information that you need?

They should not hesitate for a second to tell you what your monthly payments are gonna be, what taxes and insurance is gonna be on an estimated level. Obviously, you don’t know which home you’re gonna get yet so that’s somewhat of an estimate. But they should be able to give you ranges on purchase prices and monthly payments and what is the percent rate that’s going right now and how much are the closing costs? This should be very up front. If they’re gonna tell you, “Oh, we don’t know about closing costs,” well, maybe they need some time to do some research on some loan products but then get back in touch with them again and sit down and make sure you understand all of the costs that it’s gonna take to buy that home.

There are closing costs, loan origination fees, interest payments, all these things that kind of roll up that add up to quite a few pennies out of your pocket. So make sure that you really go in with your eyes wide open to know what it’s gonna cost. Now, one thing I do want to talk about here, a lot of people go online and they’ll put in their numbers and they’ll get this pre-qualification letter. Well, what is the difference between a pre-qualification letter and a pre-approval? Well, there’s a very big difference. A pre-qualification is just you telling a computer, “I make $100,000 a year and yeah, I can afford that house.” Well, a computer doesn’t know, they haven’t looked at any of your income documents, they haven’t taken your credit score. They don’t know if you’re loan worthy or not. So that pre-qualification letter is just you saying you can afford it. It’s not really that helpful.

I mean, if you’re really honest, maybe it can be a good start but you really need to go and talk to somebody. After you get in all those papers they need and you meet with that loan officer then you’re gonna get a pre-approval. Now, a pre-approval, that’s a really good start. That’s saying that somebody has looked at your paperwork, has gone through and said, “Yes, this person can afford this house and we feel very good about it. We’re gonna loan them this money.” After that pre-approval process goes, then, hey, you’re ready to go out there and start shopping for a home. So, go out, find a local lender, get pre-approved and then you’ll be ready to go shopping for that first house. Thanks so much for watching today, guys. Subscribe to my channel and hit that little bell icon so you can be alerted when new videos are uploaded. Happy shopping.