The Poison Pill of Home Buying

By Raymond Stoklosa · September 27th, 2009

San Mateo home buyers biggest mistake

Arguably, the single most common mistake home buyers make is financial unpreparedness, or starting the home buying process without putting their financial house in order. The golden rule of home buying is “Find a Loan First and Then Find a Home.”

Home Buyers Biggest Mistake – Financial Unpreparedness

In the latest episode of The 3 Minute Coaching Moment, I discuss the biggest mistake San Mateo County home buyers make – financial unpreparedness.

How Do I Get Started?

The first step in the loan process is to obtain a genuine pre-approval. A genuine pre-approval is a firm loan commitment from a reputable lender. A loan commitment is the lender’s guarantee to loan the buyer (borrower) a maximum amount of money at a specific interest rate and terms. Armed with a genuine loan pre-approval the buyer is effectively a cash buyer

What Does a Genuine Pre-Approval Mean?

A genuine pre-approval means the lender of choice has verified and substantiated the buyer’s employment, income, assets, debt position, credit history and score. The buyer has satisfactorily explained to the lender any derogatory credit blemishes and shown proof of funds for down payment, closing costs and safe reserves. Any gift funds have been documented and the source of funds tracked. For more information about what is and what is not a genuine pre-approval, check out this explanation of what is and what is not a pre-approval by our Co-Author, Chris Williamson on the SanMateoMortgageBlog.

Why Get Pre-Approved?

With a genuine pre-approval, you’ll not waste your time looking at homes you cannot afford. A loan pre-approval determines your purchasing power and financing options, and demonstrates your credit worthiness. A pre-approval shows you are a serious, prepared and financially able buyer. A pre-approved buyer can advance the escrow process faster with a greater certainty of closure and will put you in a better position should you find yourself in a multiple offer situation.

Since the lender has already credit-approved the buyer, all the lender needs to fund the loan is a satisfactory appraisal and an acceptable Preliminary Title Report. When you are in contract, there are many other things to investigate. Front loading the process allows you to focus on the property meeting your standards, while the lender goes to work behind the scenes to put together the necessary paperwork to close the loan.

Find a Loan First and Then Find a Home is the mantra for smart home buying.

How Can You Get a Genuine Pre-Approval?

All pre-approvals are not equal. For a genuine pre-approval, contact Chris Williamson of Mortgage California in San Mateo. Chris will ensure you are genuinely pre-approved. His pre-approval letters demonstrate his clients’ credit worthiness and put them above other borrowers in a multiple offer situation.

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