Rent or Buy - Preapproval
Updated: Feb 15, 2018
So I know that I wanted a home and had to get out of my current apartment in less than six months. The countdown had begun. I really had no idea what I really wanted other than what I had seen on those late night HGTV shows. The most important thing for me was a place for me to put my own BBQ grill. With this in mind, I began going to open houses in the community. Not just regular open houses but to the fanciest open houses in town, 1M and more properties. If you are going to go, go big right. These places would afford me the space to have nicest grill around. After going to a few of these places and talking to listing agents at these showing, most didn’t want to talk to me until I got a preapproval letter.
A pre “what”. A preapproval is a notification by a bank that you meet these basics consideration for them to loan you funds to purchase a home. This shows agents and sellers that you have the means to get a home, well at least get one financed. A part of the process the banks let you know how much home you could afford. Well I could not afford those million dollar homes that I looked at on the weekend. I did make well enough that I didn’t have to stay in the grimy areas of town either.
An additional note about the preapproval. Your credit and income are vital to this part of the process. The banks care about your FICO score. This seemingly magical number is how many institutions measure your ability to pay them back. It determines your level of risk, and the lower their risk the cheaper they will loan you money. This score is based upon your credit history, so essentially to have one you have had to at one point or another owed someone money. Isn’t it ironic that to get money from one place you had to owe money somewhere else previously? Anyways there is plenty of information out about how to build your credit history. My personal suggestion is to start with a secured credit card and pay off the balance every month.