What's the first step towards buying a home?
The first key to competing in this market with other buyers is to have your "pre-approval letter" ready in hand.
Most buyers don't realize it until it's too late, but the pre-approval letter is submitted with the purchase offer to the seller. If you don't have it ready, you can't prove to the seller that you have done your due diligence to make sure you can get a loan for their property. If you can't supply the letter, that leaves room for another buyer who is pre-approved to get ahead of you. So rule #1 for buying success is to always get a pre-approval first!
Pre-approval letters are important to sellers so they know that the buyer is most likely to be able to financially purchase the home. By knowing this, the seller can confidently accept or counter the offer if they want. The seller does not want to waste time working on an offer when the buyer's actual purchasing status is still up in the air.
Sellers also want to know that before a potential buyer even steps into their property, that the buyer has been pre-qualified and is not "just looking". To let a buyer into a home usually costs the sellers time and effort. If there are animals, the seller needs to coordinate taking them out. If they have children, they need to coordinate where they can go so the home is not occupied when the potential buyer walks through with their agent. If there are several showings scattered throughout the evening, then the sellers must make arrangements to be somewhere else for all those hours. Sellers only want serious and pre-approved buyers to come through their home and the only serious buyers are the ones that have taken the first step and obtained the much needed pre-approval letter from the lender of their choice.
One of the other benefits you will receive from obtaining your pre-approval letter is that you will find out what TYPE of loan you are approved for. (Yes, there are several different types of loans!) Each loan type has certain requirements in relation to the current condition of the home and your financial status. If you don't know your loan type, then you simply won't know what type of home you are qualified to buy. The most common example here would be a home where there is much needed repair work. This condition requires a specific loan type so that the necessary repairs can be completed and approved by the lender. If you were not approved for this loan type, then you should not be looking at fixer uppers.
So, in summary, it really does all start with the pre-approval letter, whether you are a first time home buyer or a buyer who has already bought and sold before. And yes, you will need to actually call a lender and speak with them regarding your current financial status or apply online with your information. Nothing difficult to get through whether you apply online or visit the lender in person. Just remember that the process is free, quick and is definitely the first step you will need to take towards home ownership!