Noob question from first-time homebuyer

[DingDingDao]

I'm going to go get pre-approved for a mortgage, but being as this will be my first home purchase, I don't have any experience with this. As such, I have a couple of stupid questions.

1) Do pre-approvals expire? That is, I probably won't actually be buying until late this year or possibly even next year, as home values in my area continue to decline. Should I wait to get pre-approved until closer to actual homebuying time or can I just do it now?

2) A friend of mine suggested that I get pre-approved only for the amount I want to spend, and not for what I can actually afford (which would be more). His reasoning is that if a selling agent sees my pre-approval letter for, hypothetically, $800K, when my offer is only $715K, this might drive the seller to counter-offer, knowing I'm capable of affording more. Any truth to this?

Thanks for the help.

 

[Kelvrick]

The pre-approval letter is just a formality. It doesn't really mean much. Look at the 15 day or so period you have after an offer is accepted to pull out. Its just some broker/banker briefly going over your financials.

My letter from wells fargo lasted for 2 months and then he just emailed me a new letter with a different expiration date.

That could be true for some agents, but on the other hand, they can also think you're looking at other (better) homes. That means you could easily walk if they try to jerk you around.

 

[bctbct]

I would wait until a few months before you plan to start looking for pre approval. Being pre approved basically means you could qualify for the loan, but any change in your fianancial status could throw that out the window. When you qualify, avoid making significant changes like buying 5k in appliances the week before you close, a last minute credit check will be run by the mortgage company.

I doubt the seller would have any idea how much you qualify for.

 

[amdskip]

Pre-approval is not necessary IMHO. It's just a good basic outline of how much you can afford. There are plenty of free calculators out there online that will do the same thing. I walked into a bank here when I was buying and the lady just grabbed a calculator and wrote out how much I could afford.

 

[DingDingDao]

Thanks for the replies. I guess I'll have to wait until after I close to buy the new car

I kid, I kid.

 

[OCGuy]

Originally posted by: amdskip
Pre-approval is not necessary IMHO. It's just a good basic outline of how much you can afford. There are plenty of free calculators out there online that will do the same thing. I walked into a bank here when I was buying and the lady just grabbed a calculator and wrote out how much I could afford.

Pre-approval is very necessary when making an offer. Obviously not 100% of the time, but I am seeing requests for pre approvals on every listing right now.


Some seller's agents want a full-blown TBD property approval from the lender, not just a letter.

 

[DingDingDao]

Originally posted by: OCguy

Originally posted by: amdskip
Pre-approval is not necessary IMHO. It's just a good basic outline of how much you can afford. There are plenty of free calculators out there online that will do the same thing. I walked into a bank here when I was buying and the lady just grabbed a calculator and wrote out how much I could afford.

Pre-approval is very necessary when making an offer. Obviously not 100% of the time, but I am seeing requests for pre approvals on every listing right now.


Some seller's agents want a full-blown TBD property approval from the lender, not just a letter.

Yeah, the wife and I have been looking at listings all over Irvine and Tustin and literally every selling agent was telling us that we needed pre-approval. It's not that big of a deal to me, just wondering about some of the smaller details.

 

[Billb2]

"Pre approval" just means the seller doesn't have to dick around with deadbeats.

 

[Miramonti]

1) Preapproval varies between lenders, some are more casual than others. If you have great numbers, they obviously aren't going to cut you out quickly, but they might ask for updated financials if more than a month or two elapse.

2) When making an offer price for the house, ask your lender for a preapproval letter specifically for that offer only and no higher, and submit that letter with the offer.

 

[OCGuy]

Originally posted by: DingDingDao

Originally posted by: OCguy

Originally posted by: amdskip
Pre-approval is not necessary IMHO. It's just a good basic outline of how much you can afford. There are plenty of free calculators out there online that will do the same thing. I walked into a bank here when I was buying and the lady just grabbed a calculator and wrote out how much I could afford.

Pre-approval is very necessary when making an offer. Obviously not 100% of the time, but I am seeing requests for pre approvals on every listing right now.


Some seller's agents want a full-blown TBD property approval from the lender, not just a letter.

Yeah, the wife and I have been looking at listings all over Irvine and Tustin and literally every selling agent was telling us that we needed pre-approval. It's not that big of a deal to me, just wondering about some of the smaller details.

Sweet, great area, enjoy. :thumbsup:

 

[tk149]

My realtor told me that a pre-approval is basically just an indication that you are a serious buyer, and if you make an offer on a home, the seller will consider your offer more seriously than someone without a pre-approval.

I don't really see it as especially necessary, but it's free, so why not?

 

[Noirish]

you might be able to get a couple pre-approval letters with different amounts for different price level.

 

[nanobreath]

1) Get pre-approved when you start seriously looking. All they do is look over what you make and what you say you owe. Run a credit report. Doesn't take long, I did mine over email and phone. Howevr it saves crucial time later!! I.E. Don't wait till you're putting in an offer. Giving all your information to the lending agent will save you time during the crunch time of an offer. Most offers have time limits of 24-72 hours. You need to get the ball set in position so when the time comes you can just give it a little shove.

2) GOOD ADVICE. On my house, my realtor worked with my lending agent to get a preapproval letter for the specific houses I was putting in an offer on. The lending agent basically told me I was pre-approved for up to a certain amount (WAY more than I was willing to buy), after which I went and started looking at houses. My RA then got the letter to include with the offer for that specific amount. I never actually saw this letter!!

 

[L1FE]

1) An important thing to note is that being pre-approved for a loan does NOT necessarily lock in your interest rate. A lot of brokers/states won't let you lock in your rate until you're actually under contract. Some brokers may let you pay a fee to lock in a low rate, but it usually expires within a couple of months. When rates are volatile, this means you could end up paying a lot more per month, etc.

2) My broker gave me a number of good faith estimates over a pretty broad price range. I told my agent my top price, but the pre-approval letter for my offer wasn't actually created until I made my offer. Make sure your broker can do quick turnarounds.

Hope that helps...