Purchases of real estate in the Vail Valley have been rampant this spring and summer. Many existing homeowners are finally seeing appreciation in their homes, which is allowing them to sell and then buy again. First-time homeowners are still able to obtain financing programs with little money down and low interest rates. Such programs are enabling first-time buyers to purchase a home where the total monthly overhead is often less than their current rent. Resort markets are experiencing the same purchasing pace.
Regardless of whether the buyer is looking at high-end resort properties, a first house purchase or a jump up to a second home, going through the initial pre-qualification process with a local mortgage lender is the first and most important item of business. This pre-qualification can be quicker, easier and less intrusive than most potential borrowers think.
With that being said, I will be the first to stress that buying a home is a complex process with many variables involved. Furthermore, I will also continually reiterate that the process of securing a mortgage for the purchase is intricate and requires the guidance of a seasoned loan officer. Those nuances, intricacies and complexities will come out as the process unfolds, but they need not be overwhelming if the process is taken step by step. The first step is getting pre-qualified. By speaking with a qualified, local lender and getting pre-qualified, the borrower will have a better understanding of what the estimated overhead they are likely to incur on a monthly basis will be, how much out of pocket they will need to close the transaction and how much they can potentially borrow.
The initial pre-qualification portion of the process does not require as much as most borrowers might think. A quick synopsis of income, employment, credits, debts and assets can provide enough information to begin the discussion. Exact numbers on the necessary information is not necessarily required. Ball park figures of annual earnings and the sources of those earnings are enough to calculate a general idea how much of a mortgage a borrower can qualify for. An analysis of estimated assets in the bank can quickly be done to determine how much a borrower can put down on a purchase.
Once those two factors are reviewed, credit and debts are the next piece of the puzzle. Credits and debts are often the unknown variable. The amount of outstanding monthly debt obligations, along with a credit rating or credit score, impact borrowing potential significantly.
If a borrower can accurately account for all monthly debt obligations and the status of their debts, this can be sufficient enough to continue with the pre-qualification process. By status, I mean it is important to note if there are accounts in collection or outstanding judgments, liens, etc. Even if a borrower can accurately account for this information, obtaining a current credit report is the next prudent move. A current and updated credit report will give an exact figure of other existing debts and the credit or FICO rating. Credit reports will cost roughly $25 dollars and can be obtained by the loan officer or borrower.
Pre-qualification, or pre-qualifying for a loan, is meant to be a quick snapshot of a borrowers income, assets and debts in order to produce general numbers of how much a borrower may qualify for and what the overhead will likely be. But pre-qualification is just the initial and first step in the process.
Pre-approval for a loan is a different analysis. In order to become pre-approved for a loan, documentation to support income and assets as well a lender-pulled credit report are required, making this process much more in-depth. When it comes time to submit purchase offers, the scenario is a little more in-depth and actual documentation needs to be reviewed and analyzed.
William A. DesPortes, of Central Rockies Mortgage Corp., can be reached at 970-845-7000, ext. 103 and william@ds mortgage.org.