With mortgage rates still favorable, home prices rising and the number of existing homes on the market near record a record low, having sound financing is essential if you hope to purchase a home heading into the busiest homebuying season of the year. Here’s how a loan commitment gives you a head start against other buyers in the market.
First things first, what is a loan commitment?
Meeting with a mortgage banker should always be your first step when you decide to purchase a home, regardless of it being your first purchase or tenth. A pre-approval is the traditional route taken by homebuyers but a loan commitment takes the pre-approval process a few steps further.
After your lender runs your credit score and compiles a loan application with the information you provide regarding income, assets, employment, etc. you will be asked to provide supporting documents, including tax returns, pay stubs, W-2's and bank statements.
Once all of the information in your loan application is verified with those supporting documents, your lender can issue a loan commitment (even prior to finding a home to purchase).
Here are three reasons why you should get a loan commitment this spring.
The Ability to Present the Best Offer on a Property
Homebuyers who are both committed and prepared to buy a home are major selling points. With home inventory lagging, multiple-offer scenarios are becoming commonplace in certain markets. A loan commitment allows you to present an offer with cash-offer power, because your home financing is sound and secure (pending the home appraisal).
Peace of Mind
A loan commitment is a reliable commitment from your lender stating the amount of money to be loaned, the interest rate you qualify for*, type of loan and period of time for which the commitment is good.
The process of buying a home and applying for a mortgage can be emotional, even stressful. Obtaining a loan commitment will give you peace of mind that your home financing is sound, even prior to finding a home to purchase.
The Power to Act Quickly
While shopping for a home with a pre-approval is better than shopping without, a loan commitment gives you the ability to expedite the loan process, which also appeals to home sellers.
To learn more about obtaining a loan commitment, contact one of our mortgage bankers. For more information about the loan commitment versus pre-approval process, download our free Mortgage 101 Handbook.