So many things we do require approval from a person, a group, or a system of some sort. We need the approval to get into the dream college. We need the approval to obtain auto insurance based on our driving record. If we have an insurance claim, we need approval from the adjuster for the claim to be paid. We need it to get a job or promotion. And finally, the approval from the ever-intimidating father of the girl or boy we want to marry. Most things we do will require approval for us to get what we may want or need.
In real estate, the buyer will need the loan approval from a lender. Even if all involved in the transaction perform their needed tasks with perfection, and the lender or at least the money does not show up at the closing table, it is all done in vain.
There are many types of loans to assist buyers with a variety of options. FHA or government-assisted loans will accept lower credit scores with a smaller down payment. VA loans offer loans to military service members and their families with sometimes no down payment at all. USDA loans offer help to low-income families, which are subsidized by our federal government. There’s also the old standby conventional loan. These can be done by any lender. They are much easier to obtain, but will require a larger down payment than the others.
And to add to the pile of options there can be down payment assistance, down payment grants, fixed rates, adjustable rates, 10-, 20-, 30-, and I have even seen 40-year term loans. It can be a very complex and complicated process, but any good lender will guide you and help you find the right loan fit for your needs. Lenders are like a lot of us. They offer a needed service, but only get paid if they help you find the loan.
Is loan approval something you should have before you start your home search? Some may not agree with me on this, but I have to say with all confidence, yes you should. The approval will tell you what price range you should be looking at based on the information provided. Now that’s some pretty handy information to have. Should you look at the $100,000 or $200,000 range? Or maybe homes priced at or below $75,000. Do you have some credit issues that need to be resolved before any type of sales agreement will ever be accepted? Should you be looking at all? Maybe your credit, your employment length, or your income is not enough to proceed. Again, that’s all some pretty handy information that all involved would need to know.
As crazy as it may sound, we will find the home to fit your loan. It’s a cart before the horse kind of thing.
For those of you that did go to the dad to ask for the daughter’s hand in marriage (I did not), wasn’t there much thought and preparation that went into it first? I am betting you had a pretty good idea what the answer was going to be before the question was asked? The same rule will apply for your mortgage.
Randy Butler is a lifelong resident of Highland County and a licensed real estate agent for Classic Real Estate in Hillsboro.