Should I Buy A House During The Holidays?

Q: I’m in the market for a new home and wondering if I should push off my search until door with holiday wreathafter the holidays. Is it a good idea to buy a new home during Christmas?

A: While spring and summer tend to see the highest volume of home sales, it doesn’t mean they’re the only time to buy a house.

Let’s take a closer look at some of the myths and lesser-known facts about timing the purchase of a home and explore the pros and cons of buying during the holidays.

The myth about buying in the spring

Contrary to popular belief, springtime can be the worst season to purchase a home. While the longer daylight hours do make it easier to check out the exterior, shopping for a new house during the hottest real estate season can mean facing all kinds of drawbacks and difficulties.

First, and most importantly, sellers tend to mark up their prices when they see heightened demand for their homes. Also, the flooded market can lead to expensive bidding wars with buyers who are also interested in the same property. Plus, if your search is successful and you find a new home during the spring, the closing process can drag out much longer than necessary as title companies, inspectors and movers may not be able to service you in a timely manner during their busiest season of the year.

Why Christmas can be a better time to buy

Shopping for a home during the winter, and especially during the holidays, offers the following advantages:

Homes are priced to sell

Most of the houses you’ll find on the market during the late fall and early winter will be holdovers from the spring and summer season. At this point, homeowners may be desperate to sell and get their property off their hands. Alternatively, the houses may have just been put on the market because of the owner’s sudden and urgent need to relocate due to unforeseen factors like a job change, divorce or another life-altering event. In either case, the owner is looking to sell quickly, and will likely be more willing to compromise on their original asking price than homeowners selling in the spring and summer. In fact, according to The Wall Street Journal, home prices can drop to a 12-month low in December.

Holiday spirit makes people more agreeable

People tend to be in a more generous frame of mind around the holidays. Let this factor work in your favor by shopping for a home during the holiday season. You can walk away with a dream home at a dream price, and you may even be able to negotiate some extras, like furniture or a fresh coat of paint, into the selling price.

Fewer buyers on the market

With more people looking to relocate during the spring and summer months, you’ll have less competition when house-hunting around Christmas time. This will give you an edge in bidding wars and it will make it easier for you to negotiate to bring down an asking price on a home.

Professionals of the field are more available

December is usually the slowest month of the year for home sales. This can work to your advantage if you choose to buy a home around the holidays. Your real estate agent will likely have plenty of time to show you around since fewer other people are looking to buy during this season. The various professionals you’ll need to hire during the home-buying process-including an attorney, home inspector, underwriter and mover-will likely be able to service you promptly as well.

Before you go house hunting

While buying a house during the holidays can be a great idea, keep these factors in mind before you give your agent a call:

  • Daylight hours are short during the winter, giving you a small window of opportunity to search.
  • You won’t be able to see a home’s property in its full glory during the winter months.
  • Some sellers may not be too keen on throwing their homes open to viewers during the holidays.
  • Unexpected inclement weather may delay some parts of the home-buying process, like the inspection or even the closing.
  • You’ll have fewer homes to choose from when house-hunting during the winter, as a cooler real estate market means slimmer pickings.

Shopping for a new home during the holidays may not be conventional, but it can mean finding your home sweet home quickly, easily and for a far better price.

If you’re in the market for a new home, make sure to stop by [credit_union] to ask about our home loan options. We’ll help you move into your dream home with the most favorable terms.

Your Turn: Have you bought a home during the holidays? Tell us about it in the comments.

SOURCES:
https://fitsmallbusiness.com/best-and-worst-time-to-buy-a-house/

https://www.thebalance.com/when-is-the-best-time-to-buy-a-home-1798329
http://www.freddiemac.com/blog/homeownership/20170129_pros_cons_buying_home_in_winter.page
https://loans.usnews.com/articles/reasons-to-buy-a-house-during-the-holidays
https://blog.nationwide.com/best-time-to-buy-a-house/
https://www.thebalance.com/selling-your-home-during-the-holidays-1799068
https://realestate.usnews.com/real-estate/articles/should-you-consider-buying-a-home-during-the-winter

Can I Buy A House When I’m Paying Off A Student Loan?

Q: I graduated college with a huge student loan debt. Since then, I’ve landed a decent jobfamily in front of home and I’ve been making steady payments toward paying down my loan. Is it possible for me to buy a house while I’m still paying off this debt?

A: Student loan debt that is managed responsibly should not hold you back from purchasing a house. There are several important factors to consider before making this choice and steps you’ll want to take before you start house-hunting.

Are you really ready to buy a house?

Before you take a look at your finances to determine if you can pull off this purchase, make sure this goal is in your best interest.

For starters, do you really know which city or neighborhood you’d like to live in at this point in your life? You are likely just starting out in your career and you might be better off with the flexibility that comes with renting. This way, if an excellent employment opportunity requiring a move arises, you’ll be free to accept it. You also may or may not have settled down in terms of a life partner. It generally does not pay to buy a home you’ll only live in for a few years before selling.

Next, think about the financial ramifications of this purchase. Are you really comfortable taking on another huge loan right now? Also, you will likely have to live with a bare-bones budget to meet your mortgage payments without neglecting your student loan debt. Do you really want to live with a no-frills spending plan in the foreseeable future?

Consider these questions carefully before making your decision.

Getting started: Boost your credit

Once you’ve determined if it would be beneficial for you to purchase a home right now, you’ll want to start improving your credit. Your credit wellness is the primary factor that home lenders consider when deciding if you’re eligible for a mortgage. It also figures into the rate they will offer you.

Here are some ways you can boost your credit score in the months leading up to your mortgage application:

  • Pay all your bills on time. Set up automatic payments to make it effortless.
  • Keep your credit utilization at less than 30 percent.
  • Pay your credit card bills in full, and before they’re due.
  • Don’t close old accounts or open new cards. You want your credit history to be lengthy, and both of these steps can significantly bring down your average.

How high is your DTI?

Lots of young college graduates think it’s impossible, or difficult, to obtain a mortgage when carrying student loan debt. In fact, a 2018 Student Loan Hero survey found that 43% of college-educated Americans with student loans postponed buying a home because of their student debt.

Lucky for you, there is very little truth to this concern. As mentioned above, a student loan that is handled well should not be a deterrent to getting a mortgage. To make sure you’re managing your student debt responsibly, set up automatic monthly payments on your loan so you never miss a payment or a due date.

In addition, make an effort to pay your student loan back as quickly as possible so it doesn’t reflect badly on your debt-to-income (DTI) ratio. Since taking out a mortgage means accepting more debt, lenders are careful to check that you aren’t carrying too much other debt. Ideally, your total debt payments, including your mortgage, should account for less than 36 percent of your income.

If your DTI is on the high side, you may not be eligible for a mortgage just yet. Consider refinancing your student loan to a loan with lower interest rates so you can pay it off sooner and then apply for a mortgage when your DTI improves. You can also look for ways to increase your income to tilt your debt ratio in your favor.

If you’re carrying any other debt, such as credit card debt, you’ll want to pay it down as quickly as possible as well.

Determine how much house you can afford

Before you start shopping for a home, find out how much house you can actually afford. The best way to obtain this information is by applying for a pre-approval from a home lender. This will tell you exactly how high you can go while showing sellers that you’re serious about buying.

If you won’t need your pre-approval just yet, but you’d like an idea of how much you’ll need to save for a down payment, you can use an online mortgage calculator to get your magic number.

Start saving for a down payment

Once you have your numbers worked out, you’ll need to save up for a down payment. Trim your budget in any way you can and look for side hustles to boost your income and make saving simple. Then, set up an automatic monthly transfer to your [credit_union] Savings Account so your money can grow while you sleep.

At this point, you may want to look into a local down-payment assistance program or a federal loan program, such as an FHA loan, which only requires a down payment of 3.5 percent. If you live in a rural area, you might qualify for a USDA loan, and if you’ve served in the military, you’re likely eligible for a VA loan.

When you’re ready to take this step forward, call, click, or stop by Destinations Credit Union to find out about our home loans. Our fantastic rates and hassle-free pre-approval process make a Destinations home loan an excellent choice!

Your Turn: Do you think it’s a good idea for college graduates to buy a house while they’re paying off a student loan? Share your thoughts with us in the comments.

SOURCES:
https://www.investopedia.com/personal-finance/save-down-payment-or-pay-student-loans/

https://www.cgsnet.org/ckfinder/userfiles/files/Denied-The-Impact-of-Student-Debt-on-the-Ability-to-Buy-a-House-8_14_12.pdf
https://studentloanhero.com/featured/student-loans-buying-house/
https://www.thebalance.com/rachel-morgan-cautero-4155623

Mortgage Rates Are Dropping; Should I Refinance?

Q:  I’ve heard that mortgage rates have dropped dramatically since the start of 2019. three people going over paperworkShould I refinance my mortgage loan to take advantage of these lower rates?

A:  Refinancing a mortgage is essentially paying off the remaining balance on an existing home loan and then taking out a new mortgage loan, often at a lower interest rate. It may sound like a no-brainer, but there are many factors to consider before moving forward with a refinance.

Is it a good time to refinance?

Mortgage rates have been falling steadily over the last few months. During the last week of March this year, rates took their biggest one-week nosedive in more than a decade, and mortgage applications rose 39%, as thousands of homeowners sought out their lenders for a refinance.

However, the downward trend has already reversed as of the beginning of April, when rates hit 4.29 percent. That’s up from 4.17 percent just one week prior. If you’re thinking of refinancing in the near future, it’s best to do move quickly so you can lock in the lowest possible rate. You may be able to save hundreds of dollars a month if you refinance a loan that currently has a relatively high interest rate.

Is a refinance right for you?

While this is definitely an excellent time to take out a new mortgage, that doesn’t mean a refinance is the right fit for everyone.

Here are two reasons a refinance might be a good fit for you:

  1. Your credit is strong and you’d like to lower your monthly payments

The first, and most obvious, reason homeowners refinance their mortgage is to take advantage of a lower interest rate. The drive behind this reason might be a change in finances, personal life or simply the desire to save money. As mentioned, the current mortgage rates make this an excellent time to refinance into a lower interest rate.

Don’t try a refinance unless your credit is in good shape, though. Taking out another mortgage with a less-than-desirable credit score can mean getting hit with a high interest rate, even if national rates are dropping.

Aside from reducing your monthly payments, a lower interest rate can also help you build more equity in your home sooner.

  1. You’d like to shorten the life of your loan

People sometimes choose to refinance their mortgage because they want to finish paying off their loan sooner. If you have a mortgage that has a really high interest rate but you can easily meet these payments, consider refinancing into a shorter-term option. You may be able to pay off your loan in half the time without changing your monthly payment much at all.

When refinancing your mortgage is a bad idea

In the following three circumstances, refinancing your mortgage may not make sense.

  1. You’re in debt.

If you’re looking for the extra stash of cash each month to pull you out of debt, you probably shouldn’t be refinancing. Most people who refinance for this reason end up spending all the money they save, and then some. Without making any real changes to your spending habits, giving yourself extra money is only enabling more debt. While the intention is rooted in sound logic, unless you make an equally sound change in your spending habits, you’ll be right back to your present situation in very little time.

  1. A refinance will greatly lengthen the loan’s terms.

If you’ve only got 10 years left on your mortgage and you want to refinance to stretch out those payments over 30 years, you won’t come out ahead. Any money you save on lower payments will be lost in the cost of the refinance and the extra 20 years of interest you’ll be paying on your mortgage.

  1. You don’t plan on living in your home much longer.

If you plan on moving within the next few years, the money you save might not even come close to the costs of a refinance.

How much will it cost?

Homeowners are often eager to get started on a refinance until they see what it will cost them.

Remember all those fees and closing costs you paid when you first bought your house? Prepare to pay most of them again. Broker fees will vary, but a typical refinance will cost anywhere between 3-6% of the loan’s principal.

Before proceeding with your refinance, make sure you’ll actually be saving money. You can do this by procuring a good faith estimate from several lenders. This will get you your projected interest rate and the anticipated loan price. Next, divide this price by the amount you’ll save each month with your anticipated new rate. This will give you the number of months that will have to pass before you break even on the new loan. If you don’t plan on staying in your home for that long, or you can’t afford to wait until then to recoup your losses, refinancing may not make sense for you.

Rates are still low, and if your finances are in good shape, a refinance can be a great way to put an extra few hundred dollars into your pocket each month. [If you’re ready to talk to a home loan expert about refinancing, call, click or stop by Destinations Credit Union today to ask about getting started on your refinance. We’re always happy to help you save money!

Your Turn: Have you refinanced? What drove your decision? Was it the right decision for you? Let us know in the comments!

SOURCES:
https://www.myfinance.com/5-reasons-to-refinance/?utm_source=Millennial+Money&utm_campaign=millennialmoneycru&utm_medium=mfCRU

https://www.consumersadvocate.org/mortgage-refinance/a/best-mortgage-refinance?matchtype=e&keyword=should%20i%20refinance&adpos=1t2&gclid=CjwKCAjww6XXBRByEiwAM-ZUILOeJrx3aTigcckJXeQcxYZ5KC-gPj1HDcbQYQlprrg3zX08LqGaohoCL14QAvD_BwE
https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage/
https://www.investopedia.com/mortgage/refinance/7-bad-reasons-to-refinance-mortgage/
https://www.bankrate.com/mortgages/analysis/
https://www.wkbn.com/news/local-news/with-mortgage-rate-drop-many-buyers-consider-refinancing/1897961701

Buying A Home In The Winter

Q:  I’m ready to buy a new home and I’d rather not wait until spring. What do I need to house for sale with snow on the groundknow about buying a house during the winter?

A:  Spring and summer are, by far, the most popular seasons for house-hunting. But, that shouldn’t stop you from looking for your dream home in middle of winter. Though icy driveways and snowed-out open houses can be less than thrilling, there are surprising benefits to purchasing a home during the coldest time of year.

Let’s explore the various aspects of buying a home in the winter.

The challenges

House-hunting during the winter months has lots of obvious disadvantages, and some less obvious ones as well.

First, it can be difficult to check out a property that is covered in snow or ice. A lush yard of trees, bushes and blossoming flowers can look stark and bare during cold winter months. There will also be some structural elements, like the septic tank, roof and AC system, that can be difficult or impossible to inspect during the season. With fewer hours of daylight, it can also be harder to get a good look at the home, especially if your schedule isn’t flexible.

Home-shopping during the winter also means working with fewer options on the market. Sellers know that spring is peak season for house-hunting, so most will wait until the weather warms up to list their house for sale.

Finally, if you decide to go through with a sale during the winter, you can expect delays throughout the home-buying process. Inclement weather can push off the scheduling of important events, like the inspection, appraisal and even the final walk-through or closing.

The advantages

You might be working with slimmer pickings in winter, but you’ll also be dealing with more motivated sellers. Homeowners who choose to list their properties for sale during the winter are likely quite eager to sell. You’ll also find some homes that have been on the market since the previous spring with an equally motivated seller. Plus, the smaller pool of buyers during the winter puts you at an immediate advantage. These factors will make it easier for you to negotiate for a lower price. In fact, according to research by Zillow, homes that are listed for sale in December generally sell for $3,100 less than average.

You can also use your favorable position to ask the seller to throw in extras, like window treatments, light fixtures, appliances and furniture.

Buying a home in the winter can also mean enjoying better service from all the professionals you work with during the process. Your Realtor, inspector, lender and mover will have fewer clients during the winter and will be able to provide you with optimal service, as well as be more available to promptly answer your questions.

Finally, inspecting a home during harsh weather will enable you to see how the house handles the cold, snow and ice. You’ll also be able to check out the heating system so there are no surprises after moving in.

Tips and tricks

If you’ve decided to go house-hunting during the winter, keep these tips in mind:

  • Ask to see photos of the home during warmer seasons. To get a picture of the property in its prime, ask the seller to provide pictures showcasing the yard, pool, patio, flowerbeds and more during the spring or summer months.
  • Take full advantage of the buyer’s market and offer a starting bid that is well below the listed price.
  • Ask for documentation for home features that are difficult or impossible to check out because of weather. Have the seller provide proof of the last roof inspection or replacement, the most recent day of service for the septic tank and the age of the A/C units. If something needs fixing, ask for a credit toward its repair or renegotiate the home’s selling price.
  • Don’t rush your decision. A narrow selection of houses doesn’t mean you need to compromise on the home of your dreams. If you can’t find a house that checks off all or most of the features on your list, wait it out a bit. Next season’s sellers will start listing their homes right after the Super Bowl, so be patient and hang tight until you find what you’re seeking.

The real estate market may cool down during winter, but if you know how to overcome the challenges and optimize the advantages, you can walk away with a hot deal on a home during the coldest time of year.

Are you in the market for a new home? Stop by Destinations Credit Union to ask about our home mortgage options! We’ll help you move into your dream home with the most favorable terms.

Your Turn: Did you close on a home during the winter? Share your best tips with us in the comments.

SOURCES:
http://www.freddiemac.com/blog/homeownership/20170129_pros_cons_buying_home_in_winter.page

https://realestate.usnews.com/real-estate/articles/should-you-consider-buying-a-home-during-the-winter
https://easymortgagecompany.com/5-advantages-buying-home-winter/
https://www.trulia.com/blog/what-you-need-to-know-about-buying-a-home-this-winter/
https://www.fortunebuilders.com/buying-a-home-in-winter/

 

5 Ways To Pay Off A Loan Early

If you’re like most Americans, you owe money toward a large loan. Whether that meanscouple working on computer carrying thousands of dollars in credit card debt, having a hefty mortgage in your name or making car loan payments each month, loan debt is part of your life. This means you’re looking at hundreds of dollars in interest payments over the life of the loan(s). There’s also the mental load of knowing you owe perhaps tens of thousands of dollars and that you’ll be paying back the loan for years to come.

It can all get kind of depressing-but it doesn’t have to be that way.

Did you know there are simple, but brilliant, tricks you can employ to lighten the load? With a carefully applied technique, you can pay off your mortgage, auto loan, credit card debt and any other debt you’re carrying quicker than you thought possible. These tricks won’t hurt your finances in any dramatic way, but they can make a big difference to the total interest you’ll pay over the life of the loan and help you become debt-free faster.

You can free up more of your money each month, use your hard-earned cash for the things you want instead of forking it over in interest and live completely debt-free sooner than you’d dreamed. It’s all possible!

A note of caution before we explore these tricks: Check with your lender before employing any approach, as some loan types have penalties for making extra or early payments (we don’t at Destinations Credit Union!).

1. Make bi-weekly payments

Instead of making monthly payments toward your loan, submit half-payments every two weeks.

The benefits to this approach are two-fold:

  • Your payments will be applied more often, so less interest can accrue.
  • You’ll make 26 half-payments each year, which translates into an extra full payment on the year, thereby shortening the life of the loan by several months or even years. If you choose this method with a 30-year mortgage, you can shorten it to 26 years!

2. Round up your monthly payments

Round up your monthly payments to the nearest $50 for an effortless way to shorten your loan. For example, if your auto loan costs you $220 each month, bring that number up to $250. The difference is too small to make a tangible dent in your budget, but large enough to knock a few months off the life of your loan and save you a significant amount in interest.

For a potentially even bigger impact, consider bumping up your payments to the nearest $100.

3. Make one extra payment each year

If the thought of bi-weekly payments seems daunting but you like the idea of making an additional payment each year, you can accomplish the same goal by committing to just one extra payment a year. This way, you’ll only feel the squeeze once a year and you’ll still shorten the life of your loan by several months, or even years. Use a work bonus, tax refund, or another windfall to make that once-a-year payment.

Another easy way to make that extra payment is to spread it out throughout the year. Divide your monthly payment by 12 and then add that cost to your monthly payments all year long. You’ll be making a full extra payment over the course of the year while hardly feeling the pinch.

4. Refinance

One of the best ways to pay off your loan early is to refinance. If interest rates have dropped since you took out your loan or your credit has improved dramatically, this can be a smart choice for you. Contact Destinations Credit Union to ask about refinancing.

It’s important to note that refinancing makes the most sense if it can help you pay down the loan sooner. You can accomplish this by shortening the life of the loan, an option you may be able to afford easily with your lower interest rate. Another means to the same goal is keeping the life of your loan unchanged and with your lower monthly payments, employing one of the methods mentioned above to shorten the overall life of your loan.

5. Boost your income and put all extra money toward the loan

A great way to cut the life of your loan is to work on earning more money with the intention of making extra payments on your loan. Consider selling stuff on Amazon or eBay, cutting your impulse purchases and putting saved money toward your loan, or taking on a side hustle on weekends or holidays for extra cash. Even a job that nets you an extra $200 a month can make a big difference in your loan.

Triumph over your loans by using one or more of these tricks to make them shorter and pay less interest. You deserve to keep more of your money!

Your Turn: Have you used any of these methods or a different approach for paying off a loan early? Tell us about it in the comments.

SOURCES:
https://www.thebalance.com/how-to-pay-off-debt-early-315571

https://www.google.com/amp/s/www.huffpost.com/entry/top-6-ways-to-pay-off-any-loan-faster_b_1624242/amp
https://www.payoff.com/life/money/6-ways-to-pay-off-your-car-loan-early/

7 Reasons Not To Skip A Home Inspection

Shopping for a new home can be an exciting blur of listings, neighborhood scouting andinspection open houses. There’s so much to consider! You want a house in the perfect neighborhood with that gorgeous kitchen and great yard, all within your budget.

And then, it all finally comes together and you think you’ve found your dream home. But don’t go “under contract” just yet! First, be sure to have an inspection contingency included in your contract. Doing so can save you a ton of aggravation and thousands of dollars in the long run.

Once you’re under contract, you’ll need to have your future home professionally inspected by a certified engineer or a licensed inspector. The inspector will carefully examine the entire house from top to bottom, checking its systems, structure and equipment for functionality and potential problems.

A home inspection will set you back several hundred dollars, but it can easily save you thousands down the line. Before you officially become the new owner of the house, learn all you can about its general condition.

Here are 7 reasons you don’t want to skip a home inspection:

1.)   Find deal-breakers

A house can look fantastic, but have major structural or technical issues with its wiring, roof, HVAC system, plumbing and more. A quality home inspection will give you the inside scoop on a house before it becomes your home. If the inspection reveals any large problems that would require heavy maintenance or expensive repairs, you may want to back out of the deal. Having an inspection contingency in your contract gives you a way to opt out even after you are officially under contract.

If the inspection reveals major problems, but you like the home too much to back away, you can ask the seller to fix the problems before the closing date. Sellers will usually agree to cover any major repairs or to offer the buyer a credit toward overseeing the repairs themselves.

2.)   Safety concerns

An inspection can reveal the presence of harmful substances like radon, carbon monoxide and mold. Look for these hazards before the home is officially yours. You don’t want any unpleasant surprises after it’s too late.

3.)   Anticipate future costly repairs

A home’s systems and equipment may appear to be working perfectly when they’re actually on their last legs. A professional inspector will be able to determine the age and condition of the home’s systems and equipment, and then forecast when they may need to be repaired or replaced. This might not be a big enough deal for you to back out of the contract, but it will help you budget for a major repair several years down the line. Alternatively, you may be able to use it for price negotiation.

4.)   Reveal illegal additions

The awesome rec room you love in the basement of your potential new home might have been illegally built. An inspection will check for rooms, garages and basements that were added or finished without following legal codes or obtaining the proper permits. Having an illegal addition in your home means owning property that does not officially exist. This can get you into trouble with home insurance and property taxes, and can make it difficult to do more work on these areas in your home.

If a home inspection reveals any illegal additions, you can ask the seller to obtain the proper permits now, use this information as a bargaining chip or choose to back out of the deal.

5.)   Obtain insurance easily

Lots of home insurance companies will not insure a home if it has not undergone a certified inspection. Insurance companies don’t want to take a chance covering a home that’s going to need costly repairs in the near future.

6.)   Learn how to protect your investment

If possible, arrange to follow the inspector around the home as they complete the job. They will be an invaluable source of information for you, providing tips and knowledge on how best to maintain your home, its systems and equipment. Knowing how to properly care for your home can save you thousands of dollars over the years.

7.)   Negotiate

Most home inspections will reveal several problems. If these problems are minor enough to keep you interested in buying the house in its present condition, you can use them as bargaining chips to renegotiate the purchasing price of the home.

No matter how perfect your dream home looks, it’s never a good idea to skip a home inspection.

Are you in the market for a new home? Call, click or stop by Destinations Credit Union today to ask about the fantastic home loan options we have for you!

Your Turn: Has a home inspection saved you from a possible horror story? Share it with us in the comments.

SOURCES:
https://www.ahit.com/news/why-home-inspections-are-important.htm

https://www.investopedia.com/financial-edge/0511/10-reasons-you-shouldnt-skip-a-home-inspection.aspx
https://www.veteransunited.com/futurehomeowners/5-key-reasons-to-have-a-home-inspection-before-you-buy/
http://www.homeinspectionexpertsraleighnc.com/5-reasons-to-get-a-home-inspection-on-a-new-home/

Why Do I Need To Get Preapproved For A Loan?

Q: I’m in the market for a new home, and everyone I talk to, from friends to financial Home with Sold Sign in frontadvisors, suggests I get preapproved for a mortgage before I start house hunting. Why is this so important?

A: You’re actually on the receiving end of great advice. When looking to take out a large loan, whether it’s for purchasing a home or buying a car, having that preapproval in hand before you start your search is crucial.

Depending upon the type of loan, the process of getting preapproved for a loan can take time. The lender will begin by asking for your financial history and other personal information. If you have a co-borrower, the lender will need this information about them as well.

You’ll be asked to provide your Social Security Number (SSN) and for permission to allow the lender to access your credit report. If the information you provide is satisfactory, as is your credit report, the lender will begin constructing the details of your loan. When they have determined how large of a loan you will be eligible for, they will grant you a preapproval letter. The letter will also detail your estimated interest rate on the loan, though that will sometimes also depend upon the specifics of your purchase, such as the year and condition of a car or appraisal on a home.

Having your preapproval letter will shorten the loan process significantly when you’re actually ready to take out the loan. However, that is only a small benefit of getting preapproved before you start “shopping.”

Here are some other advantages of getting preapproved for a loan:

1.) You’ll know what you can afford

Your preapproval will tell you exactly what you can afford. This way, you’ll avoid being disappointed later when you have your heart set on a certain home only to be told you can’t swing it financially. Knowing how large a loan you’ll qualify for will simplify your search and get you into your new home or car sooner.

Be sure to calculate other monthly costs, such as property taxes, home insurance and increased auto insurance rates when determining the actual amount of money you’ll need to shell out each month.

2.) Don’t get taken for a ride

Picture this scene at a car dealership:

Salesperson: So, you’re here to buy a new car! What are you looking for?

You: Well, I want something with a smooth ride and –

Salesperson: Got it. And how much of a monthly payment can you afford?

You: Weeelll, I think I can swing up to $200 a month, but I’d rather something closer to $150 if you —

Salesperson: Step right this way please! Let me show our new line of Camrys at just $205 a month! They have the most luxurious feel and the ride is smooth as butter!

What happened here is, quite simply, a salesperson looking to make the most money out of a customer. When you’re unsure about how much you can spend, the dealer will capitalize on your uncertainty and try to sell you a car that just barely skims the maximum amount you’ve decided you can afford.

Also, when you name a monthly payment you can manage, the dealer will work with that number instead of talking about the price of the car. They may try to inflate the payment with charges and fees just because they fit within your named payment amount.

In contrast, when you show up at the dealer with a preapproval in hand, the salesman will have to show you cars with price tags that fit within your loan amount.

Don’t get taken for a ride; get your preapproval before you set foot in the dealer shop!

3.) Be taken seriously

A car dealer will take you a lot more seriously when you wave that preapproval in their face, since having that information in hand shows you’re ready to buy.

When purchasing a home, the same rule holds true. A realtor will be able to assist you more efficiently when you know exactly how much house you can afford. They may also give you better service since you’re showing that you’re serious about buying a home. In fact, many realtors refuse to show homes to buyers who don’t have a preapproval in hand.

4.) Know you have financing you can trust

When you show up at the car dealership with a preapproval from your credit union, you know the deal is in your best interest. Many auto shops have access to several financing options and they’re almost always going to put customers into financing options that are in their own wallet’s best interests.

5.) Purchase your dream home

A preapproval makes you a valuable customer. It also helps you stand out from the pack. If you’re looking to buy a home in a competitive market, you may be competing with several other buyers for the same house. Having your preapproval will give you a leg up on bidding wars. A seller will be more eager to work with someone who’s already started the mortgage process. You can end your search sooner with a preapproval!

In the market for a new home or car? Don’t forget to call, click, or stop by Destinations Credit Union to hear about our fantastic rates on mortgage and auto loans!

Your Turn: Based on your own experience, why do you think it’s important to get preapproved for a loan? Share your thoughts with us in the comments!

SOURCES:
http://www.investopedia.com/mortgage/pre-approval/ 

https://www.nerdwallet.com/blog/loans/advantages-of-getting-pre-approved-for-a-car-loan/
https://www.google.com/amp/s/www.zillow.com/mortgage-learning/pre-approval/amp/