The real estate market is booming in California. As per recent data, the average increase in the number of homes sold was 1.6% on a year-on-year basis. To buy a home in California, you must undergo a pre-qualification or preapproval.
Pre-qualification uses your self-reported income and debt to provide an approximate estimate of your borrowing ability. Typically, it excludes a credit check.
Preapproval confirms the homebuyer’s creditworthiness before making a purchase contract. For this, the mortgage application is filled out, and the lender verifies the information provided, including the credit check.
If the applicant is preapproved, a preapproval letter is issued. It is an offer (but not a commitment) to lend the specific amount, good for 90 days.
Preapproval To Buy A Home In California
Preapproval in California involves an in-depth review of the borrower’s total wealth. There are multiple benefits to getting pre-approved. Firstly, you get a real picture of your borrowing capacity. It helps you save time and effort by narrowing your house search to a particular price range.
Now, here is a detailed look at how to get pre-approved.
- Credit score
The mortgage rates you qualify for depend on your credit score. So, as you prepare the preapproval, polish your credit score. Any score above 670 is considered good!
- Get in touch with a mortgage loan officer
A mortgage loan officer will ease the process of getting loans for you. You’ll get advice specific to your financial goals. After an initial conversation, you will have a good idea of your home financing options. As you’re providing them with an economic overview, make sure to be honest.
- Set the budget
The loan officer will tell you the maximum loan value you will likely qualify for. Based on this, set the budget for your home.
- Research the housing market
With the budget in mind, start researching the housing market. The market conditions in San Diego and Los Angeles are different. It would be best to contact a realtor to help you narrow down the options.
- Apply for preapproval
At this point, you must officially apply for preapproval through the application. You will be asked to provide photocopies of certain documents. Some of these documents are required for last year’s federal tax returns and pay stubs for the previous 30 days.
- Receiving the preapproval
A preapproval letter tells the sellers you are serious about buying a home. Usually, preapprovals are valid for 90 days. However, they can be extended if you cannot buy a home in California within those 90 days.
Tips To Make Preapproval A Smooth Process
Now that you’ve completed the entire preapproval process, here are some tips from our end that can help you.
- If you discover your low credit score, look for ways to raise it. This could include clearing up large credit card debt and ensuring that all future payments are made on schedule.
- Gather all important documents beforehand. It allows one to stay calm-headed as the process goes on.
- You can find out how much a lender might lend you by being pre-approved. However, you are the only one who can determine how much you can afford to pay monthly for a home. So, make sure to create a realistic budget.
- Reduce your existing debt. If your debt ratio to income is lower, lenders can determine that you have more money to pay for a mortgage.
What Happens Post-Preapproval?
After you get pre-approved, another process starts. You will pick up from the research part of the preapproval procedure. At this point, the actual process of seeing homes starts. Hiring a good realtor like Kim Eckert Homes has gone a long way. Once you finalize which home to buy, you will sign contracts with the seller to transfer the ownership.
The Bottom Line
Preapproval does not guarantee that you will get the loan. It is just one step closer to approval. The recommended course of action is to get a preapproval mortgage before beginning your house search. It may be too late to start the preapproval procedure if you want to make an offer on a house you like! So, get your preapproval today. We at Kim Eckert Homes are experienced and will guide you at every step of this journey to buy a home in California.
