In busy season, get pre-approved for a mortgage

If you are in the market for a new home, do your homework before house hunting.

"For home shoppers contemplating a purchase, the primary thing for them to do is to be the best informed buyer that they can be," says Jerry Cox, a Realtor with RE/MAX Real Estate Services in San Clemente, Calif.

 

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Low rates and springtime kick up the pace
Certain times of the year are busier than others for real estate agents and lenders. Spring is considered the busiest season of the year for home buying and mortgage shopping. Winter is usually quieter.

When mortgage rates are low, seasonal influence is irrelevant. Housing becomes more affordable to more people and the market hops.

When the housing market is hot, it's especially important for people to bargain smart and keep an eye on their lenders to make sure their paperwork -- and their dream homes -- don't get lost in the shuffle.

Why springtime is home-buying time
As the snow melts and baseball players emerge from dugouts everywhere, first-time home buyers and families start looking for new homes, old homes and just about everything in between. Some parents shop then so they can be ready to move between the end of one school year and the beginning of the next.

Other buyers, flush with cash from tax refunds, find making a down payment easier after April 15. But regardless of the reason, the spring through early summer rush never fails to arrive.

Because many sellers know this is the case, potential home buyers face a tougher negotiating environment than they might at other times of the year.

The same scenario holds true when the housing market is busy with low rates and lots of willing buyers. The seller often holds the winning card.

Keep an eye on your lender
When mortgage business is brisk, lenders are swamped. That means buyers usually experience longer waits between application and closing because appraisers, title researchers and other parties involved in a mortgage transaction get bogged down.

"There's a potential for that," Cox says. "It's a function of the demand on financial institutions to process loan applications. It's also a function that some lenders are more competent in getting it done in a streamlined fashion than others."

This can handicap consumers because sales contracts usually require a buyer to have the mortgage in hand by a certain date for the deal to go through. To avoid bumping up against that deadline, Cox says shoppers should aggressively track lender performance, either over the phone, in person or on the Internet.

Online mortgage company E-LOAN Inc. of Palo Alto, Calif., lets customers check their loan status at its Web site via a password-protected system, for instance.

Pre-approval speeds the process
A borrower who wants to get a leg up right from the get-go can do so by shopping smart, too. One way to succeed is to get pre-approved for a loan, rather than just pre-qualified.

While buyers need only submit their own income and debt information to get pre-qualified, they generally must allow lenders to verify that data through tax forms and a credit check to get pre-approved. As a result, the pre-approval carries much more weight in the negotiating process.

"While obtaining a pre-qualification had been the accepted norm for purchasing, with the fast marketplace we're in, that's not sufficient," says David Fialk, owner of Choice Realty in Iselin, N.J. "It may not help them get the home they want because of multi-offer submissions from other buyers and brokers at the same time."

Instead, "Obtain firm mortgage approval in advance of buying," he says. "This way, when the sales agent presents the offer, it's essentially like presenting a cash deal to the seller."