The ABCs of Getting a Mortgage Loan for First-Timers

Posted on: 2 August 2017

If your employer transferred you to an area with a hot real estate market and you are worried about being able to buy a house, then there are specific actions you can take to increase your chances of getting the home of your choosing, including:

Get Pre-Approved for a Mortgage, Not Just Pre-Qualified

When you are trying to make a strong purchase offer on a home in a hot market, it is vital that you can prove you will have the funds to complete the sale. Unless you are sitting on a big pile of money and plan to pay for your new house with cash, you need to obtain a pre-approval letter from your chosen mortgage company.

It is important to note that there is a big difference between "pre-qualification" and "pre-approval" letters. While many lenders will take a quick look at your finances and pre-qualify you for a mortgage, the pre-qualification doesn't come with any real guarantee backing it up. In contrast, a pre-approval letter comes with a guarantee that your finances have been thoroughly examined and that the mortgage company is willing and able to fund your purchase.

Go in Fast and Strong with Your Best Purchase Offer

When real estate is selling within days and for top dollar, it's not the time to think too long about making a purchase offer or trying to save yourself money by submitting a low-ball offer. You need to know what you want in a property and how much you are willing to pay for it. When you find a property that meets your requirements, then you need to put in the strongest offer you can and do it very quickly.

Don't Include Any Unnecessary Contingencies in Your Purchase Offer

In conclusion, when you are buying a house in a hot market, you should never include any unnecessary contingencies in your purchase offer. While it is reasonable to include contingencies for roof and pest inspections, you should avoid a contingency for the sale of your current home.

While a contingency basing the purchase of your new home on the sale of your current property protects you from owning two homes at the same time, it also adds significant risk for the seller. If your home doesn't sell, then your new home purchase will not move forward and the seller will have to find a different buyer. Due to this additional risk for the seller, you will likely find that your purchase offer is denied if it includes a home sale contingency. If the seller has multiple purchase offers, then they will accept one from a buyer who doesn't require it to lower their risk and ensure their home is going to complete the escrow process.

Keep these tips in mind when looking at vacation homes for sale.