13
Dec
By Fred Gruber
Mortgage

Why Getting Preapproved Before Your House Hunt Is Crucial

Buying a home is one of the biggest financial decisions you’ll ever make, and you want to make sure you’re as prepared as possible. Whether you’re just starting to browse homes or are ready to put in an offer, one of the most important steps you can take is getting preapproved for a mortgage.

Preapproved vs. Prequalified: What’s the Difference?

While you might come across the term prequalification during your home search, it’s important to understand the distinction between being prequalified and preapproved.

Prequalification is a simpler process where the lender gathers basic financial information to give you a rough estimate of how much you can borrow. However, it doesn’t carry the same weight as preapproval. Prequalification can be helpful if you’re just beginning to look at homes, but it doesn’t carry the same authority or guarantee as preapproval.

Preapproval, on the other hand, is a more detailed and formal process. Since it involves submitting documentation and having your financial information reviewed by the lender, it offers a more accurate picture of what you can afford. A preapproval letter gives you a competitive edge, especially in a competitive housing market.

Why Getting Preapproved Now Makes a Big Difference

  1. Know Your Budget Upfront
    One of the main benefits of getting preapproved is that it helps you understand exactly how much home you can afford. A pre-approval letter ensures you won’t fall in love with a house you can’t afford, saving you time and emotional energy.
  2. Stand Out in a Competitive Market
    If you’re in a market where multiple offers are common, having a preapproval letter can give you a distinct advantage. Sellers want to know that potential buyers can actually secure the financing needed to complete the transaction. In many cases, sellers may choose an offer from a preapproved buyer over one from someone who hasn’t completed this step.
  3. Faster Home Search and Closing
    Preapproval can also speed up the home search process. When you have a pre-approval letter, you can immediately start making offers on homes you love. Furthermore, because the lender has already reviewed your financials, the closing process will likely go much faster, reducing the time between offer acceptance and homeownership.
  4. Secure the Best Interest Rate
    The better your financial position, the better the interest rate you can secure. If you receive a pre-approval with favorable terms, it can give you an edge in negotiating the best deal.
  5. Confidence in Your Offer
    When you make an offer on a home, you want to feel confident that your financing will be approved. You know that the lender has already done the homework and that you’re in a strong position to secure the loan you need.

How Preapproval Can Help You Make the Best Offer

In today’s housing market, being preapproved is almost a necessity. Without it, you may find yourself losing out on your dream home to another buyer who has already taken the necessary steps.

If you’re thinking about buying a home, getting preapproved is your first step. Give us a call to see what options are available for you. 

12
Dec
By Fred Gruber
Credit Scoring

The Differences Between Hard and Soft Credit Inquiries

Credit inquiries, also known as credit pulls or checks, are a standard part of assessing creditworthiness. However, not all credit inquiries are the same. They fall into two main categories: hard and soft credit inquiries. Understanding the differences between these two types is crucial for managing your credit health and avoiding misconceptions. Below, we explore the distinctions between hard and soft credit inquiries to provide clarity on their purpose and impact.

1. Purpose and Usage

Hard and soft credit inquiries serve different purposes.

  • Soft Inquiries: These occur in situations like checking your own credit score, background checks by potential employers, or pre-approval offers from financial institutions. They are typically informational and not tied to major financial decisions.
  • Hard Inquiries: These are required when applying for a new line of credit, such as a mortgage, car loan, or credit card. Lenders use hard inquiries to evaluate your financial history and determine your loan eligibility and terms. While hard pulls are essential for lending decisions, they temporarily affect your credit score.

2. Impact on Credit Score

The effect of credit inquiries on your score is another significant difference.

  • Soft Inquiries: These have no impact on your credit score, regardless of how often they occur. For example, you can check your credit score frequently without concern, as soft pulls are unrecorded on your credit report. Institutions conducting soft inquiries without your explicit permission also don’t harm your score.
  • Hard Inquiries: These can lower your credit score, typically by one to five points per inquiry. While the impact is temporary (about one year), hard pulls remain on your credit report for two years. Excessive hard inquiries in a short period may raise red flags for lenders, suggesting financial instability or risky borrowing behavior.

3. Consent Requirements

Whether an inquiry requires your permission is another key distinction.

  • Soft Inquiries: These often occur without your consent. For example, financial institutions may perform a soft pull before sending pre-approval offers, or an employer may check your credit as part of a background screening.
  • Hard Inquiries: These require your explicit consent. For instance, when applying for a mortgage or car loan, the lender must inform you that a hard credit check will be performed. This ensures transparency, as hard inquiries affect your credit score.

Understanding the differences between hard and soft credit inquiries empowers you to make informed decisions about your credit health. Soft inquiries are harmless and routine, while hard inquiries should be minimized to maintain a strong credit profile. By managing your credit wisely, you can position yourself for financial success.

11
Dec
By Fred Gruber
Holidays

5 Financial Tasks to Tackle Before the New Year

As the year draws to a close, it’s the perfect time to take stock of your financial health and set yourself up for success in the coming year. You can create a solid foundation to achieve your goals by focusing on key areas. Here are five important financial tasks to consider before the new year begins.

1. Review Your Spending

Take a close look at your spending habits over the past year. Were there months or categories where expenses went overboard? Identifying patterns—like higher spending during the holidays or summer travel—can help you adjust your budget. If you don’t already have a clear budget, now is the time to create one. A well-planned budget provides a detailed overview of your income, expenses, and opportunities for savings.

2. Set Savings Goals

Savings are the cornerstone of financial security. Reflect on whether you met your savings targets this year. If you fell short, determine why—whether due to overspending, lack of planning, or unexpected expenses. Start the new year by establishing realistic savings goals, and prioritizing an emergency fund. Experts recommend setting aside three to six months’ expenses for unforeseen events. Once your emergency fund is in place, consider saving for specific goals like a vacation, a down payment on a home, or educational expenses. Automate savings through your bank to make consistent contributions effortless.

3. Tackle Debt Strategically

Debt can hinder financial growth if left unchecked. Begin by assessing high-interest debt, like credit cards, which can accumulate quickly. Choose a repayment strategy that works best for you, such as focusing on accounts with the highest interest rates or using the snowball method, which targets smaller debts first. Consolidation options, like refinancing or personal loans, may also simplify repayment and reduce interest. Addressing debt now will free up resources for your future financial goals.

4. Check Your Credit Report

Your credit report is a critical tool for assessing financial health. Request a free copy of your report from annualcreditreport.com to review for errors or unfamiliar accounts that could indicate identity theft. If inaccuracies exist, take steps to dispute them. Regularly monitoring your credit ensures accuracy and helps you maintain a strong credit score. Choose a date, like your birthday, as an annual reminder to review your report.

5. Evaluate Your Mortgage

Your mortgage is likely one of your largest financial commitments. Review it to see if there are opportunities to save or build wealth. For example, refinancing could lower your interest rate or eliminate mortgage insurance. If you’ve built substantial equity, consider how it might support future financial goals. If you’re planning to purchase a home in the new year, evaluating your financial readiness and exploring pre-approval options can help streamline the process.

Taking these steps before the new year not only sets a strong financial foundation but also gives you peace of mind knowing you’re prepared for what lies ahead. Make it a habit to reassess periodically, adapting to changes in your life and financial priorities.