Home Buying in Houston>Question Details

David , Real Estate Pro in Texas

Do I need to already have a target property and downpayment before getting pre-approval for a mortgage?

Asked by David , Texas Thu Jun 13, 2013

I will be buying a new home after selling my existing home. I have been planning on using the equity in my current home as down payment for the new home, once it actually is put on the market and sells.
I have tried to get pre-approved for a home mortgage, but each person I spoke with asked me if I had a specific property that I wanted pre-approval for.
I was able to get a pre-qualification letter, but really out of about 5 places I contacted I only heard back from 2.
The market in my area has such a fast turnover right now that as soon as a home in my price range comes on the market its pretty much gone making it difficult to have a "target" home in mind. Supposedly, I have a good credit rating and have been employed with the same company, even though it has changed ownership twice, for 7 years and have no real current debt to speak of.
Do I need to wait until I have a target home and the money from my sold home to get pre-approved or am I just talking to the wrong people?

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Answers

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Annette Lawrence 727.420.4041’s answer
Debra Rose provided a very articulate response and an almost step by step instruction to follow.
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The response you received from the lenders are so bazarrie I can't help but believe you presented them with a question differnt than the one you presented to us.
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"I would like to get pre-approved for a home mortgage." should result in chatting with a loan officer who will reqest finanaical and income information and send you the pre-approval or say...'ahhh...wait a minute, where did this $150,000 come from?."
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From what I have read regarding the Houston real estate market, presenting a purchase offer contingent on the sale of your home which is not under contract has as much chance of surving as a snowball in Miami.
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Get your liquid funds available. This will include accounting for the process from the sale of your home.
Get a preapproval letter. AVOID the "TO BIG TO CARES." (there is scary stuff going on in that arena.Read my Q&A post today)
Consult your real estate professional.
When you idenfy the property you want to buy you can submit the exisiting preapproval but is it IMPERATIVE you ask you agent to refer a lender who has a track record of closing on time, under budget and without little drama, when buying a home like this. Skipping this step could get you eliminated from being considered as a viable buyer.

Best of success,
Annette
1 vote Thank Flag Link Fri Jun 14, 2013
Great response! How is your market?
3 votes Thank Flag Link Fri Jun 14, 2013
Thanks Cape Cod! Our market is great down here in the DFW area! How is your market??
0 votes Thank Flag Link Fri Jun 14, 2013
Hi David,

It is definitely good to have a target home but not necessary. Loan officers prefer for you to have a target home because your "estimated" mortgage pymt will be pretty close to what they tell you. Your mortgage pymt will vary depending on the sales price, property taxes of the property, homeowner's insurance, and mortgage insurance.

If you are needing to use the equity from your current home for the down pymt of your new home, I would recommend to wait until your current home has an executed contract and pass the option period before you started looking for a home.

I hope this advice helps you! Best wishes for selling your home and finding your new home!!

Make it a Great Day!

Tamika A. Goree
Broker | Owner
The DFW Property Shop
Cell: 972.697.1178
Fax: 972.665.7148
Email: tamika.goree21@gmail.com
0 votes Thank Flag Link Thu Jun 13, 2013
thank you all for your comments.
I imagine I need to do some more searching for lenders and just wait until my home sells to get really serious about buying again because of my local market.
I need some time to read through all of the replies so I will take a look once I am off work tonight :)
thanks
0 votes Thank Flag Link Thu Jun 13, 2013
good luck to you!
Flag Fri Jun 14, 2013
Sounds like you've been talking to the wrong lenders.
0 votes Thank Flag Link Thu Jun 13, 2013
Hello David, as others have mentioned, you do not need a target property to get a pre-approval. In fact, often folks like to have a pre-approval in place because it helps them determine their budget and what they should keep in mind when they begin the buying process.

There is a chance that a given lender may need to make sure that a current home sells before the closing of the new home you are purchasing, however, a lot of that depends on what your financial strength is. Once you talk with a good lender, they will take time to explain how this will all work for you.

If you are specifically speaking of the new home as a "newly built" home, please keep in mind that with the inventory being low currently, you may have to wait to build your home if you don't select one from the existing inventory.

Do take some time to call on a few more lenders. Try some that come recommended. Let me know if I can help.

Persis
persis.realtor@gmail.com
713-294-7747
0 votes Thank Flag Link Thu Jun 13, 2013
Hi,
No you don't have to wait. We have lenders that will do approvals in advance of picking out a home. They don't need a property address.

We get you approved on your credit and income, then when you find a home the underwriting is finished up with the purchase contract, title work, and appraisal. That will also speed up the closing to have you approved in advance.




Anna Maria Durr, NMLS 266699
Codemark Financial
2626 Richmond Ave., Houston, Texas 77098
281-592-0667, anna@codemarkfinancial.com
0 votes Thank Flag Link Thu Jun 13, 2013
To me, that is a big RED FLAG; when the lender wants to play games like that:
One of the purposes in getting Pre- Approved is to find out what you are qualified for; how much!
Lets say that you are approved for $450,000; that doesn't mean that you must spend $450, it just tells you your limit, and approximately what your monthly vig will be.
You can cement it when you sell your house, and you will know what your down payment can be.
Be sure to get your GFE so that you know the numbers. Probably a good idea to get at least 2 quotes.
Have your Realtor go over the numbers with you.

Don't worry about a "target" home; it will not be there later! You will be wasting your time, your Realtor's time, and it will just break your heart if you fall in love with it.
0 votes Thank Flag Link Thu Jun 13, 2013
Hi David,
Many mortgage brokers and lenders should be able to provide you with a price range you could qualify for. If they do provide you with a pre-approval letter, it would have conditions that would need to be met for your loan approval which would include the sale of your current home.

In the current market, sellers will not be inclined to accept an offer with a contingency of selling their current house first. We would have to try to close on the sale of your current property and the purchase of your new one almost simultaneously, try to leaseback your sold property from the new owner for a short period of time, or have a backup plan of where you could move temporarily (if the other 2 options didn't work) until we could get your new property closed.

If I can assist further, please let me know.
Kind regards,

Sharon Fritsche, Realtor
Principal - Broker
Step By Step Real Estate, LLC
(713) 303-8160
Sharon@StepByStep.pro
0 votes Thank Flag Link Thu Jun 13, 2013
No. You can get pre-qualified and in some cases you could get pre-approved, so then all the lender needs is the target property and appraisal to complete the application process.

The typical process is to connect with a lender and provide them with all of your financial documentation. They will pull your credit and qualify you based on your credit, income, debt, and assets.

Once you locate a property, they will determine the amount you will need to use as a down payment.

It sounds like you will need to be making an offer on a home contingent upon the sale of your existing home. This scenario can be frowned upon by some sellers, especial in hot markets.

Seek the advice of your REALTOR on alternative options to a contingent offer. Possibly, sell your home first, find a temporary place to reside until you close on your new home. This will make you a stronger buyer when up against other offers who are not contingent upon a sale of their existing home.
0 votes Thank Flag Link Thu Jun 13, 2013
David,

No, you do not have to have a property picked out to get a pre-approval letter!

Part of the process of getting a pre-approval letter is to find out the answers to some questions such as "how much money do I need to put down"?

It sounds to me as if your speaking to large lenders or your local bank on the corner and they are too busy or just don't care about what you are trying to do.

Regarding the sale of your current home and getting funds from it. The lender letter can say your future purchase is contingent on the sale of your current home and verification of funds from the closing. It is not that hard! You just need a lender that will take more than 5 minutes to work with you.

I have some great lenders on my web site that would take the time to get you where you need to go. Reach out to them if you have time. http://www.markknowshouston.com/res_list.php?cat=12282&c…

You mentioned a "new" home. Is this new construction? I have some suggestions on that as well. Please reach out to me if I can be of some help.

Mark McNitt
m 832-567-4357
Bernstein Realty, Inc.
0 votes Thank Flag Link Thu Jun 13, 2013
well, if you need the money (as many people do) from the sale of your current home in order to buy the new home, then you really can't proceed until your home is sold.
Getting a pre-approval isn't your biggest concern.
Competing in an active market is.

You can try to make an offer contingent on the sale of your current home, but.....if, as you indicated, it's a brisk local market, no seller would accept that if they can sell it without any such contingency...or if they're getting multiple offers.

Sit down with an agent and plot out your course...........you need to understand what is involved and choreograph how you can compete with buyers who do not have a house to sell first.

You do need to have a pre-approval on hand, but most likely you will need to have your home (at least) under contract before making an offer.

I list a number of homes, and wouldn't advise any seller to take a "subject to" offer unless it was a house that was sitting on the market and overpriced............. or no one else was interested in it.

Come up with a viable plan.....a realistic plan.
Let an agent help you, not only with a lender, but with the entire situation .

Best wishes.............
0 votes Thank Flag Link Thu Jun 13, 2013
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