3. Getting Pre-Approved

All right, welcome to this module, Getting Pre-Approved. So at this point, we have found a solid mortgage office loan officer or mortgage broker. Now let’s talk about the pre-approval process and what you need to be prepared for. So here is what we’re going to cover. So the first thing I’m going to break down is the type of loans that are available high level. Then I’m going to get into the types of mortgages. And do you do a 15 or 30 year mortgage? Really? What’s the difference outside of the years, pre-approvals, I’m going to break down the first time home buyer programs that are available to you. The first time home buyer grants and where to look for those options. Then the first time home buyer, home loan. So if this is your first time purchasing a home, then these are going to be really, really relevant resources for you to take advantage of.

So let’s go and hop right in so type of home loans. So you have VA or Veterans Administration loans, and this is this is available to you. If you were a part of the United States forces. And when any of the military branches, then we have FHA or Federal Housing Administration loans. We have conventional loans, which are not GSE loans. Then we have fixed loan rates, adjustable loan rates, and these are going to be our three common loans. So generally speaking, my suggestion as you go with a fixed loan rate, but depending upon your situation in the home officer, well, not even the home loan, the loan officer that you’ve chosen, there’ll be able to advise you on the best one for your situation and how to go about qualifying for that. There is several different loan officers that say they specialize in VA loans, or they may specialize in veterans, or they may specialize in.

So, you know, whoever generally speaking, if you find a really, really competent professional who is ethical and understands the loan lending process, then that’s somebody you want to go with because there’ll be able to.. If you qualify for the most loan that you can get. Now 15 or 30 year mortgage. This is a common question. Generally speaking. Um, the right answer is it depends on your situation and do you have the finances to pay it off in 15 years? So if you do a 15 year loan, um, you will pay your mortgage off faster. And you’re going to also save on interest, but you also have to take into account. Do you have that available financially to, to pay off your mortgage? Um, and if you borrow for a shorter period of time, you will have a much more, you know, you’re gonna, your, your monthly payment is going to be higher, right?

So, you know, you, you want to make sure you, in my opinion, if you’re looking at this 15 versus 30 year mortgage, I’d rather you have a 30 year mortgage and just do biweekly payments and make extra payments towards your 30 year mortgage in order to pay it off in 15 years, as opposed to being contractually obligated, to pay off a 15 year mortgage, unless it’s like a, a commercial loan in which you’re forced to do it. So my suggestion, again, there’s no right or wrong answer here, but when you stop and you think about keeping more money in your pocket for that future bucket, and also you think about, Hey, look, you know what? I’d rather invest in the stock or invest in my retirement program, invest in starting a business, or just put this money in an illiquid asset. It happens to be my home, although it is going to build up equity, still going to have to take out another loan or another line of credit to get access to that equity and then pay interest for set lineup credit or, um, second mortgage.

The flip side is I’d rather you put yourself in position from a worst case scenario and pay down, mortgage quicker, as opposed to being contractually obligated, to pay it in a shorter period of time. Now, if you’re saying, Hey, look, I just want to have a 15 year mortgage because I just want to get out of the way then. I mean, that makes sense. I mean, I get it, but you just know you have to understand the opportunity costs. Yeah. I covered that prior to about the life opportunity, because if I do this, am I going to give up other areas and you probably will. Now pre-approval now this is very, very viable in every home buyers buy, because you want to know, or your toolbox, so to speak because your pre-approval is really going to be, it’s going to set the guideline for how much in the type of home you can purchase.

So, and mortgage pre-approval comes with the lender after you fill out the loan application. So once you get the pre-approval, this is going to give you the confidence to know that, Hey, look, whatever home I’m looking at, I have the ability if I want to go and engage the seller and the buyer, if I went in again, engage the seller and that seller’s realtor and all that stuff, I have the ammunition to make the transaction happen. Um, so you want to be able to have the ability to ink the deal. You, the last thing you want to do is go through all of this process, and then you’ve realized that there’s too much home. You can’t afford it. And then your heart gets you. You wasted all this time. And he’s like, man, I can’t even get this house. So you to eliminate failure as an option, we get their pre-approval upfront.

Then it puts us in the best position to negotiate. And pre-approval is not binding to any legal, it’s not any legal, um, contract. And it doesn’t guarantee that you will literally receive a mortgage loan. But what it does do is give you a strong chance about a 95% chance, assuming the worst doesn’t happen in your financial situation, that you will be able to proof of the mortgage based off all the stuff that we covered before about doing the pre-approval. So my suggestion, get that pre-approval and then that’s going to be your magic number that you can start to use, not even including if you’re going to put down a down and do all those other things. That’s what you’ll be able to use to, to find the home that fits within that particular pre-approval. Now there are several first-time home buyer programs that you should be aware of, and you will be eligible for these programs if you have never purchased real estate before in your life, which is awesome, which is a lot of people.

So if you’ve never owned or have not had any ownership interest in any principal residence in the last three years, also, you need to meet the income and purchase price limits as well, along with the credit score in order to qualify for a first-time home buyer program. So just because this is the first time home buyer, if you show that you have a larger income, especially for those people who are business owners, then you, you know, you want to make sure you’re, you’re wise with how you show your income. If you want to qualify for first time home buyer program, also the home you purchase must be in a designated area. And mostly for those programs that are offered by the state and local government. So typically when you go through that, that home buyer process is going to have a specific type of area in which you can purchase the home.

And if you’re okay with that, then you can take advantage of it. And then you have to purchase a specific kind of residence. Usually it’s a single family property. So you can’t go out and do like a multi multiplex or a singleplex or a duplex in some scenarios you want to, you want to make sure it’s a single family. So this, this goes back to doing your due diligence and doing your research and being able to know, okay, if I do do a first time home buyer program and just making a financial decision, if I do do this first time home buyer program, isn’t going to give me all the bells and whistles i.e. the area, the type of home, the price limits. Am I going to be able to get qualified for that home? Am I, or am I going to be in a box?

Right? I don’t know. You just want to, you want to make an informed decision. Again, buying a home is a lot like buying anything else. You just have to be an informed buyer and then make smart, prudent financial decisions based off where you stand financially. Now, there are also first-time homebuyer grants and the way these grants work is, um, basically unlike home loan, did you know that you can get grants from the federal agencies to help you with buying a home and unlike a loan, the grant doesn’t have to be paid back. So this is something else to look into you, it’s all dependent upon your state and where you are and what’s going on. Um, but the catch with these programs, they’re meant for areas that our government is targeted for realization re violation purposes identification. So yeah, you can get that grant, but if you do get the grant, you’re typically going to be in a zone.

And I see it all the time. I happened to be living in Atlanta and I see some really dope houses, but it’s in a risky area. So you could look at that from two points of view. What have you, number one is, Hey, look, this area is, is being, being revitalized or Re-gentrified. So if I get in now, um, my, my equity is going to start to build up. The other perspective is, is man, I’m not really trying to be around a bad area. So you have to like really, really understand that if you do get approved for that grant, that that chances are you’re going to have to go into one of those areas. You may or may not, uh, like however, it would be potentially based off that area and its potential, its uh, uh, revitalization. It was the best word I can use for it to appreciate and value.

Then first time home buyer grants typically do not cover more than 10% of the cost of your home though. So that’s something you need to be aware of and you can go to the HUD or the Housing and Urban Development website. And you can find a list of grants in your city and state as well as a list of house counselors. So HUD is a really, really excellent resource to use. I’ll put the website right below this video in this module. If you want to look for some of those first time home buyer grants and first time home buyer loans. So FHA loan is a mortgage that is insured by the HUD or the federal housing authority. Um, USDA loan is a home mortgage option available to roll into suburban home buyers, VA loans as a mortgage loan issue and approved by lenders and guaranteed by the United States department of Veterans Affairs.

So it’s basically saying that the VA is going to guarantee that then you have conventional home loans and these are going to be the list of all the loans that are available to you as a first time home buyer. Okay. So you have everything you need to be able to determine the type of pre-approval you should be looking for. Obviously you want to be going out and doing your networking and finding the research and then speak with the house loan officer, that’s going to be able to get you the best pre-approval for your financial situation.