Do I Need a Preapproval Letter Before I Go House Hunting?

A letter that says you are preapproved for a mortgage is key to successful house hunting and negotiating with a seller. It demonstrates that you have gone through an extensive verification of your financial status and concludes how much you are qualified to borrow. A preapproval document helps you determine what price range of homes you can consider and the type of loan that best works for you. It also identifies any obstacles to approval such as having too much debt or credit issues that need to be remedied.

While a loan preapproval is not required prior to house hunting, it will help assure those you are engaged in the process with that you are a serious buyer. Your real estate agent will be better equipped to take you to listed properties that you have demonstrated you are qualified to buy. Agents are also more enthusiastic when they know they are spending time with a buyer who has gone through the process to get preapproved for a mortgage.

A preapproval letter is not necessary when you make an offer on a home. In a seller’s market, if you want to be more competitive when submitting offers, having a preapproval when other contending buyers do not, will give you a strong negotiating edge. Sellers want to be assured that a buyer will be able to close the sale. A loan preapproval gives them peace of mind and they will take you more seriously as a potential buyer.

House hunting can be a nerve-racking adventure, especially in a seller’s market. Having your loan preapproval letter in hand will better target suitable properties and lessen the stress of successfully negotiating with a seller.

If you are buying a new home, contact me for an appointment so we can start the preapproval process and ensure you’re in the best position when you find a house you love.

What Credit Score Do I Need to Buy a House?

Your credit score is one of the prime factors in determining if you are qualified for a loan and the interest you will pay. Credit scores can fall into the range of 300 to 850.

There are a variety of loans to meet the needs of borrowers with credit scores as low as 580 to as high as 760 and above. The minimum credit score required will depend on the type of loan you get and what entity is insuring the loan.

Buyers with credit scores of 580 to 619 can qualify for an FHA or VA loan with minimum down payments. For a USDA loan, the minimum score is 640. Higher than the minimum credit scores and larger down payments will typically benefit the interest rate you will pay on the loan.

Since conventional loans are not insured by the government, credit scores of at least 620 or higher are required by most lenders. Larger loans will fall into the jumbo loan category, where a credit score of at least 700 is needed. As the loan amount increases so may the credit score requirement.

The best credit score to buy a house is 760 and higher according to the FICO credit bureau statistics. The higher the credit score, the more optimal the interest rate that you will pay.

Please give me a call or email me and we can see how your credit score and other qualifying factors affect what type of loan and interest rate best benefits you.