There are advantages to getting pre-approved for a loan before you begin your search for a new house.

Pre-approval removes some unwanted pressure.

Once you find a home that you want to purchase, and your offer is accepted and the forms have been signed, the clock is ticking for you to get a mortgage.  If you are pre-approved, getting a mortgage should run rather smoothly and quick.

However, if you are not pre-approved then you might run into some problems.  You will feel rushed and stressed to get the mortgage before the close.  Also, if your lender has a stack of loans to process you could seriously be "cutting it close".

Pre-approval makes you look like a serious buyer.

Suppose there are two buyers who make an offer on a house.  The first buyer is not pre-approved.  The second buyer is pre-approved and has a letter from their lender stating that they can afford the home.  The seller is probably going to pick the pre-approved buyer.  They look more motivated and creditable.  The pre-approved buyer is more likely in a better position to negotiate the price of the house also.

Pre-approval is a simple process:

• Fill out an application and give it to your lender
• The lender will obtain your credit report and qualify you based on income, debts, and credit score.
• The lender will give you a letter stating how much you can afford to pay for a house.

It's fast, easy, and concrete evidence that you're motivated in the eyes of a seller!

If you would like to get pre-approved, Vermont Real Estate agent Geri Reilly recommends calling Nick Parent at Spruce Mortgage: (802) 863-5102 or email nick@sprucemortgage.com

Some people, particularly first time home buyers, feel intimidated at the thought of making a large down payment on a house. Sometimes, too, they feel some confusion about how much will be required.

The size of your down payment will depend on the price of the home you want to buy. It will also depend on your ability to pay, and the type of mortgage you get.

As a general rule, lenders like to see a 20% down payment for a conventional mortgage.  A conventional mortgage is one that is underwritten by a bank, savings and loan , or some other mortgage company.  A 20% down payment on $100,000 home would be $20,000.

If you are selling your current home in order to buy another, you may get enough cash to cover the 20% down payment. If you are a first time home buyer, however, you may have trouble coming up with that much money.

Certain mortgage options allow you to make a smaller down payment. Some lenders, for example, will accept smaller down payments if you buy private mortage insurance (called PMI).

FHA loans require an even smaller down payment, as little as 3-5%. If you qualify for a VA loan, you don't need a down payment at all. Many special loan programs  for first time home buyers also have a reduced down payments.

The principal behind these requirements is simple. lenders know from experience that homeowners who put a substantial amount of their own money into buying a home are less likely to default on the mortgage.

And if the mortgage is secured by an insurance policy (as in PMI) or by the government (as in FHA or VA loans), the lenders feel protected and they are willing to skip the requirement for the large down payment.

Any further questions, do not hesitate to contact me. I would be happy to counsel you or recommend a good mortgage broker who can provide the specifics on the various mortgage programs available to you.