1st Step to Buying a Home
Before beginning the search to buy a home is the first step – getting a mortgage pre-approval, from a lender, or documenting proof of funds (your ability financially afford to purchase).
A pre-approval or proof of funds
How much can I afford? How much are the closing costs going to be? How much down payment can I afford? These are all questions that will need to be answered before you begin looking.
You will need to prove your financial ability before most sellers will be willing to consider an offer from you.
Pre-Approval
A pre-approval does not commit you. It is merely a face value offer – meaning, if everything you state is true, the lender can give you a loan for this amount.
In certain respects, a pre-approval binds a lender to you – it does not bind you to them. Pre-approval is done by phone, email or in-person and takes about 15 minutes. A pre-approval is basically a written agreement that says “if what you are telling me turns out to be true, I can give you a loan for up to this amount. A pre-approval will also provide you with what the costs of that loan will be, include the monthly cost.
Proof of Funds
Some buyers are in position to pay for property without needing to secure a mortgage. This advantage can be a disadvantage when attempting to demonstrate financial ability. In these cases we use a copy of a bank statement, in the buyer’s name, demonstrating the funds that show the ability to pay. There is a seasoning requirement for financial gifts. It varies, but 3 months is common. Since the account numbers are not required, these can be blacked out.