Get Pre-Approved, Get Informed, and Get Your Home in Baton Rouge

There was a time when a prospective homebuyer could be pre-qualified to purchase a home and everyone involved - the buyer, the seller, and the real estate agent - was confident that the deal would sail through the bank. The buyer and seller planned for a closing date. Since the passage of HERA, the Housing and Economic Recovery Act of 2008, obtaining a mortgage involves full pre-approval.

What's the difference between pre-qualification and pre-approval? With pre-qualification, the homebuyer would state their income and assets and advised if they were likely to qualify for a loan and for how much. Pre-approval requires the applicant to submit documents such as a photo ID, most recent W-2's, current pay stub (possibly for the last 6 months),statements from savings or investment accounts, and maybe even information on any other outstanding loans and credit card balances. The lender will pull a credit report and submit the information through an automated pre-approval process to obtain a maximum amount you can borrow.

Once the would-be buyer finds the home of his dreams - or the one he can afford according to the bank - he has to then wait for the lender to process a final approval. At that point the application comes before a human underwriter who can approve or even deny the loan based on the information, the appraisal on the home, or any changes that have occurred.

This tougher approach is a reaction to the sub-prime mortgage crisis and the lending practices that precipitated it. Much of the HERA regulation was an attempt to help homeowners whose payments had increased beyond their ability to pay, perhaps due to deceptive lending practices. For new borrowers, the act added more steps

What does all of this mean to you as a buyer? The intended effect is that you will get a loan you can afford on a home you can afford. However, getting the loan will be harder as the requirements to qualify have escalated, while the process will take longer. In theory, a greater awareness of your loan terms and home value is a positive thing. However, the new standards for being approved might throw you off track in a couple ways. If you have a good but not great credit score per the new guidelines, you are likely to get a mortgage but will have to pay more for it. You might even be denied your loan at the last minute, especially if your appraisal comes in too low or something has changed since you were pre-approved.

If you are thinking about buying a home, now is the time to confer with your agent and set into motion your plans to be homeowner. Sandy Ogburn-Sandlin and her team of agents can walk through the loan process and help you find your new home in Baton Rouge and other communities in East Baton Rouge, Ascension, and Livingston counties.