You've decided it's time to buy a home. You've been advised to contact a lender and get pre-approved, so you reach out to a loan officer, and talk on the phone. He/she asks you a few questions about your income and your debts, and then prepares a "pre-approval" letter for you, based on your representations. You come to my office, proudly clutching this preapproval letter, and you say, "let's find that perfect home for me."
That's normally music to my ears, since buyers who are ready, willing, and able to purchase a home are golden. BUT, before we start looking at properties and making offers on the house that would become your home, let's take a moment and look a little more closely at the situation. What is a "pre-approval letter", how does it compare to a pre-qualification letter, and what purposes do these letters serve?
Let's start with a pre-qualification letter. Today, you'll seldom see a letter labelled as such, but that's more likely what you'll receive. It means that a loan officer has tentatively qualified you for a loan based on your verbal representations. It is not based on a review of your complete financial history: recent pay stubs, bank statements, tax returns, or credit report. It just means that based on what you've said, you should qualify for a mortgage loan IF that information is true and correct.
A pre-approval letter is supposed to be a conditional commitment, based upon a review of your financial history. That means that the loan officer has gathered your most recent paystubs, most recent banking and checking account statements, pulled your credit history, reviewed your total assets, total debts, and has analyzed not just your credit scores, but your overall credit report. Upon review of all those documents, a pre-approval letter should indicate that you are eminently qualified for a mortgage loan, as long as your financial situation doesn't change in the near future. It's conditioned on a couple of other things, like employment verification, and adequate appraisal, but that's standard. It tells you not only that you can get financing, but will determine what price levels you can afford. It tells the Buyer's Agent that you are a qualified buyer, and it tells the seller that you can perform if they accept your offer to purchase.
Let's compare the two types of letters, using an analogy. Have you ever gotten a mailing from Publisher's Clearing House, stating that "you may have already won a million dollars?" All you need to do is complete this form, mail it in, and you may be a winner. That's approximately what a pre-qual letter stands for. It guarantees nothing. On the other hand, say you bought a lottery ticket, checked your ticket numbers against the published winning numbers, and you see that you've matched all the numbers. You've won! That's pre-approval. It's solid, it's meaningful and it's desirable.
So, why am I talking to you about these two very different letters? It's apparent from my language and tone that I am not satisfied with a pre-qualification letter, even if it says "Pre-Approval" on it. As a sales agent who works on a contingent basis (I only get paid when I sell a home), it's so incredibly frustrating to put in so many hours of time and effort in the search for suitable homes, showings, counselling, the writing of offers, negotiating the offers, finally getting an accepted offer, and then to hear from the lender that the loan cannot be appoved. All that work, all that time and effort, would be for naught. But forget about all this, because this process really isn't about me, it's about YOU.
You should be every bit as upset as I would be if this were to happen to you. While my contribution to the home purchase process is largely limited to time and effort, your contribution would be time and effort, too, PLUS you'll have some real money at stake. Say you make an offer on a property, based on your belief that you'll get your financing, and that offer gets accepted. The clock starts ticking as soon as the contract is executed, so you start with the home inspections. You pay the inspector for a home inspection, and perhaps a well and septic evaluation (very common in northern Michigan). You make your application to the lender, and you pay for an appraisal. The inspections can easily be $500-$600, and the appraisal fee is $400. You've also put down a $500 earnest money deposit. So you've contributed almost $1500 to the process. How would you feel if, after spending that money, you learn that the file cannot get past underwriting, and your loan has been denied? Your inspections and appraisal fees are non-refundable; you may be able to get your earnest money back, but it's not guaranteed. Would you be angry that you've spent this money, and it's all for naught?
When the time comes, and you're ready to start seriously looking at Traverse City real estate, please call a LOCAL lender. Don't call some 800 number, or any bank whose name ends in dot com. Call a local lender; if you need referrals, I can provide them. By utilizing local lending professionals who understand northwest Michigan real estate, and are familiar with the loan programs that would serve you best, you'll build a relationship with a person and an institution. Ask that loan officer what he/she needs to give you a solid pre-approval. It will make your life much easier and less stressful.
Last night, my wife and I attended a concert at the Interlochen Academy for the Arts in Interlochen, MI. It's a school for the performing arts, and they host a series of student productions in the winter and spring, and a series of professional concerts and performances during the summer and early fall. We saw the classic rock group Chicago last night, and it was truly an amazing evening.
For you lovers of classic rock, you know that Chicago, the band, has been together, creating music and touring since 1967. Any group that can last for 44 years has my respect, and this one still has several of the original band members. There music spans several generations, and the audience last night reflected that. We saw teenagers, 20-somethings, 30-somethings, and the whole spectrum of baby boomers from their forties to their late 60s and beyond. It's a testament to Chicago's artistic creativity and unique sounds that they can attract so many different age groups.
The band performed for well over two hours, and the music and energy level were both incredible. The crowd was enthusiastic, wildly applauding, clapping and swaying in time to the music, and the band fed off that energy from the crowd. The music took me back to my own youth, and I recalled that I saw Chicago in concert in the city of Chicago back in 1979. I was 17 at the time, and the event was a lot of fun, but I think it had more meaning to me now in my middle age. Music at its best evokes memories of times past, and when we experience that connection, it makes the music that much sweeter. I am still having difficulty believing it's been 32 years since I saw them last. Sometimes it feels like it's been only a brief period of time, and sometimes it feels like the lifetime it's actually been. I half-jokingly say that I am still just as immature now as I was then-- I think that's my way of holding on to my youth.
At any rate, it was an amazing evening spent in the company of my beautiful wife, Amy, and 2500 of my closest music loving friends. To be able to sit on the shores of Green Lake, listening to the big brass sound of Chicago while watching the sun set over the lake, is an experience not to be forgotten. Interlochen Arts Academy is a remarkable school, having produced dozens and dozens of famous and successful alumni. And to have that huge cultural icon in the small town of Interlochen, here in northwest Michigan, means that we have access to some of the most talented and entertaining singers, bands, entertainers, plays, and musicals. We may be a small community, with all the charms of a small town, but we definitely have a larger city sophistication. That's a combination not easily replicated any where else in the world.
If you're interested in Interlochen homes for sale, or Traverse City real estate, please visit my website, http://ChuckGollay.com, where you can browse all the homes available for sale. And if you'd like to discuss your real estate wants and needs, give me a call. Real estate is my favorite subject (along with my family and my dogs), and I would be happy to take your call.
The accolades keep growing for this little corner of heaven known as Traverse City, MI. The Sleeping Bear Dunes has been voted the Most Beautiful Place in America by ABC News and Good Morning America. Nestled along the coast of Lake Michigan, about 15 miles northwest of Traverse City, this huge sand dune offers panoramic vistas of Lake Michigan's shimmering blue waters. Enjoy scenic overlooks by car, hiking and biking trails, and a rugged Dune Climb from Glen Arbor to Lake Michigan. Afterwards, relax at Boone Dock's restaurant, or Art's Tavern in Glen Arbor. Visit Cherry Republic, the king of all things cherry. Or drive the scenic roads of Leelanau County, an uninterrupted drive that skirts the county and offers breathtaking views of Lake Michigan.
If you are interested in purchasing Traverse City real estate, and living where America vacations, please give me a call. I made the move here 6 1/2 years ago from Chicago, and my only regret is not having done it sooner. With so many places to see, and so many activities to enjoy, you'll love the small town charm and big city sophistication of Traverse City. See why we keep winning so many awards, from best food town, to some of the best wines in the world, to world class scenery. For more information on northwest Michigan real estate, including Traverse City real estate, please visit my website at http://www.ChuckGollay.com.
"Changing lives, one home at a time."
A recent blog by David Burrows talked about "A Doctor's Advice For Purchasing a Home." It was an excellent, well-wriiten posting, and inspired this blog of mine. Getting your financing in order is the first order of business for home buyers today. Here's why.
Back in the heyday of the real estate boom years, credit was easy to obtain. With rapidly appreciating real estate, even over-extended borrowers were likely to cover their mortgage balance and even make a tidy proft when they sold their homes. Underwriting scrutiny was not very intensive, and the money was flowing freely. Then the bubble burst, and the lending world changed--dramatically.
Today's buyers are being scrutinized like never before by lenders and their underwriters. These potential buyers are being held to much higher credit standards than the borrowers of yesterday. Gone are the days of the "80-20" mortgage, or the stated income mortgages of the past. Savings and checking acccounts are scrutinized; credit histories are examined in great detail. Monies to be used for down payments have to be accounted for: where did they come from; how long have they been in the bank? Were they a gift or a loan, or the product of actual savings?
Today's buyers are being much more thoroughly assessed for credit worthiness than borrowers from yesteryear. With so many homes already having been foreclosed, no one wants to see more foreclosures. So the lending practices and standards have evolved and lenders now expect strong credit scores, savings in the bank, reasonable debt to income ratios, and a strong ability to honor their mortgage commitments. Today's consumers may remember the days of easy money from not so long ago, and may not understand that lending practices and standards have changed so much. Conversely, some may be very aware of those changes, and are afraid to face the scrutiny. As former President Roosevelt once said:
"So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself -- nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance"
So, if you are a serious home buyer, you need to face that fear and take the first step in the process-- get pre-approved. Deal with a local lender, once whose reputation for service, knowledge and integrity is unquestioned, and determine where you stand in the process. Many consumers, including myself, have bruised credit. Taking that first step and diagnosing what ails you (credit-wise) will allow you to proactively work to improve your credit standing. If your credit is solid, your financing will be an easy and painless process. If your credit needs work, then start now to rebuild it. Fear isn't going to change your situation; only facing fear will do that.
I met a buyer prospect a couple of months ago, and she was interested Traverse City homes for sale. She kind of danced around the issue of financing, implying that her mother would either co-sign on a mortgage, or take one out herself. When I asked if her mother had gotten pre-approved, she got rather indignant. I told her, honestly and respectfully, that she had to have her financing in order before we went looking. Bank-owned homes are in high demand, and the sellers won't even consider an offer to purchase unless it is accompanied by a pre-approval letter. She was appalled that I asked her to have her financing in order, and exasperatedly asked " So you only show properties to pre-approved buyers??" Yes! It's in your best interests (and mine, too) for you to be pre-approved. It givces you the security of knowing that you can purchase a home, and it gives you a definite price range in which to look. And in these turbulent times, sellers face great risks too, so demonstrating you are capable of performing eases their worries and strengthens your bargaining power.
So, delay not in getting your financing secured. It's more important than you may realize. If you are thinking of purchasing a home in the Greater Traverse City area, please consider visiting my website at http://ChuckGollay.com, where you can search all the listings, request financing assistance, and have access to a dedicated and caring residential real estate professional.
5+ years experience, solely in residential real estate sales in the Traverse City area. I specialize in the marketing of homes (representing sellers) and short sales (both sellers and buyers).
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
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