The recent sharp drop in median home prices on all of the Hawaiian Islands has presented some great buying opportunities. However, uncertain lending conditions make Pre-Qualification for a loan a good idea.
Here are the Top 10 Reasons to get Pre-Qualified for a Loan:
- Your offer will be more appealing to the seller, and sellers may require a Pre-Qualification or Pre-â€¨Approval letter.
- You will be able to determine exactly what your monthly mortgage payments will be on any offer you might make if you are getting a fixed rate loan and you get Pre-Qualified for a certain amount. This includes the principal and interest as well as escrow, taxes, and private mortgage insurance (PMI) â€“ insurance purchased by buyer to protect the lender.
- You will save a great deal of time by avoiding looking at, or even considering, homes that you are not able to afford. You donâ€™t want to think that you have found the perfect home and then only later realize that you cannot afford it.
- Banks have dramatically tightened lending standards due to economic conditions, enforcing a stricter debt-to-income ratio (DTI) which reflects the percentage of your debt as compared to your gross annual income.
- Pre-Qualification determines precisely which loans you will be able to get based upon your credit history, income, debt, down payment amount, and other factors.
- Using a new â€œsmart-technologyâ€ real estate site such as Hawaiilife.com you will be able to precisely pre-set your search criteria â€“ including your price range â€“ and then get updates only on homes you are interested in AND are able to afford.
- Pre-Qualification will lessen your stress when choosing a loan package. You don’t have to use the same lender that Pre-Qualified you, so you can shop around and compare rates.
- You also will be in a better position to anticipate the exact closing costs of the real estate purchase, and what each of the costs are for.
- Once you are Pre-Qualified for a loan, you will be able to get optimal use of your real estate agentâ€™s time for other important aspects of the home-buying process including considering different home styles and evaluating the desirability of particular locations (e.g., the quality of the local schools).
- A mortgage broker will be able to discuss different financing options with you once you are Pre-Qualified, and he/she will also help you choose the best type of loan for your particular situation.
In summary, now more than ever it is important to Pre-Qualify for a loan if you are considering buying a house for sale in Hawaii. A Pre-Qualification Letter from a lender will state that your credit and financial information has been reviewed and is acceptable for getting a loan, though it does not provide an absolute guarantee of a loan. You may consider going the extra step and getting Pre-Approved for a home loan before you make the offer. This will give you the best chance of getting the property in a competitive market.