Preparing to Buy a Home? Get Loan Pre-Qualification and Know the Local Housing Market First

Your home, whether it’s your first or fifth purchase, is easily the most expensive single buying decision you’ll ever make in your lifetime. If you’re not careful about your decision, your home could end up as the biggest, costliest mistake of your life. If you don’t want that to happen, there are some things you must learn first when you’re ready to buy a home: pre-qualification and the local housing market.

Why bother with pre-qualification?
Pre-qualification is essentially a process where a buyer learns whether he’ll qualify for a loan or not and how much loan amount he will get pre-approval for. The loan pre-qualification is obtained from a lending institution.

You’ll need to talk to a lender to find out how much you’ll pre-qualify for. Your loan amount will depend on several factors, including your income, assets, credit, debt and overall financial status. A loan pre-qualification will let you know how much money you can get so you’ll know how much you can hope to spend in the purchase of a home.

Why a loan pre-qualification helps
When you are pre-qualified for a home loan, you are much more likely to get the home you want, especially when there are other buyers looking at the same property. It gives you a better chance over other buyers who do not have pre-qualification.

A loan pre-qualification, especially if it’s backed up by a loan pre-approval, can also help you negotiate better prices with the seller. A pre-qualification will also help you obtain a payment plan that will suit your budget better. Your loan pre-qualification figure is also a good indicator of the price range of the home you can afford. You’ll spend less time looking at property you might not be able to pay for later and focus your search on homes that are more in your price range.

Learning about the local housing market
There are two kinds of markets you have to learn about when you’re preparing to buy a home: the buyers’ market and the sellers’ market. If you understand what these terms mean, you’ll have a better idea of whether to buy or not.

The buyers’ market is simply a market environment that favors buyers, not sellers. This is the market where you, the buyer, has better negotiating powers, usually because the market is saturated with a lot of homes with only a small number of buyers.

The sellers’ market, on the other hand, means you will be facing higher home prices because there are plenty of buyers and homes sell much more quickly. When there’s more demand for homes and they’re in short supply, sellers can easily raise their prices to take advantage of a more favorable environment.

There is a third type of market that you need to be aware of, and that is the transitional market, where neither the buyer nor the seller is favored over the other. This usually happens when the shift from a seller’s to a buyer’s market or vice versa, occurs. Prices during this period are usually stabilized and there is a near equality between supply and demand.

Why you need to know about the local housing market
A home purchase is not an impulse buy. It’s something you think about carefully, considering all factors that will give you more benefits than risks. If you’re buying during times when the local housing market favors you, you’ll not only get to take your pick, you also can take advantage of really great rates. This saves you a lot of money in the process.

Tags: home loan, prequalification, local housing market, buying a home