Buying A Home In Asheville: Pre-Qualifications, Lending, and What You Need to Know
When a potential buyer begins to look into buying a home in Asheville, one of the first things they need to consider is financing. Every home has a price, and every buyer has a budget; that budget, for the vast majority of buyers, is influenced by their ability to secure a loan.
So, as a buyer, you know that you need a loan – that’s the first step, but where do you go from there? When and how should you go about getting qualified and approved for a loan, what questions should you expect to answer, and what else do you need to know?
To help answer some of these questions, we sat down with Zachary Adam of Prime Mortgage Lending of West Asheville. Adam, the company’s branch manager and mortgage loan specialist, is a resident of West Asheville with strong ties to the community and a desire to see the real estate market flourish and buyers succeed. The latter can be tricky in a seller’s market, according to Adam, but by knowing what questions to ask and what steps to take, he says, a buyer can still be successful.
Pre-Qualification vs. Pre-Approval
One of the most important factors to buying a home in Asheville in a seller’s market is pre-qualification or, in some cases, pre-approval. The two are similar, but there can be major differences between them. According to Adam, a traditional pre-qualification letter, which can be obtained over the phone in a matter of minutes, is not particularly meaningful. With his clients, he prefers a more intensive process: “We call it pre-qualification, but we run credit, we look at everyone’s financials in regards to income and asset statements, and with that credit we make sure that when we issue a pre-qualification letter it’s going to be legit.”
This is particularly important, he says, for buyers who are self-employed or participating in a tight market like the one in Asheville, and it may be beneficial to take one extra step, even before a property has been found. “What that means is a full pre-approval. You take that borrower…and we run them through every stage of the loan process. We do disclosures, we process their loan, we underwrite them – we have a live underwriter actually look at their file and approve them. That helps when someone has complicated tax returns, maybe some credit blemishes from the past, or if someone is in a business that’s sort of transitional and they want to make sure that they’re solid.” Once a buyer has gone through this process, they can rest assured that, if they and a seller agree on price and terms, they will be able to perform on the contract price without concern.
The intensive pre-qualification run by Prime Mortgage Lending of West Asheville, Adam says, has a number of benefits and helps a sale to move forward smoothly. “One, it helps expedite that transaction, so the buyer can move that much faster, because they’ve done that two weeks of already pre-processing and underwriting. Once they’re under contract we would order the appraisal, so property-related issues that might come up through inspections and the appraisal would be the only hitch. It really positions the buyer, and, from the seller’s perspective, if you get a pre-approval letter versus a pre-qual letter, it says that much more about how qualified they are.”
Credit
There is, of course, more to consider than what pre-qualification and pre-approval entail when buying a home in Asheville; in particular, Adam thinks that it’s important to demystify and dispel certain concerns that buyers tend to have about the lending process. The first is credit – what it means, what lenders look for, and what potential buyers should do to make their credit work for them.
“Some people are from the era of the Great Recession, so they saw over-leverage and they decided to step completely outside of the utilization of credit, and that can sometimes be harder for a buyer to obtain a loan when they have no credit history versus, say, bad credit.” Because a credit history is one of the first things that a lender will look at, Adam has a few tips for optimization: “You want to have a few tradelines that you’re actively using. That doesn’t mean you have to be in debt, or carry debt, but just showing that you have a responsibility of how you manage credit, and that you can access it, and, knowing you can access it, you’re not over-leveraging it.
“With bad credit, that’s something that may take time. Every situation is different, but if you think you have bad credit you’ve got to start somewhere. I’d recommend at least talking with a local lender – we do have credit repair companies on hand that we can help you with, but most important is getting a snapshot of where you are.” That snapshot, according to Adam, may not match up with a buyer’s perception of their own credit. “Some people who think they have bad credit actually…meet the minimum requirements. That sweet point of minimum requirements is somewhere in the 600 to 620 for a FICO range, and there are other types of loans that will require higher credit scores, but that’s a good benchmark.”
Down Payment
Once a buyer has a solid understanding of their credit, they can begin to consider a down payment. This is another area in which Adam sees common misconceptions, one of the most prevalent being that a buyer must have a 20% down payment in order to be successful in a seller’s market. In such a market, he says, prices are up and inventory is down – and what is available is more expensive. That makes 20% down much more difficult to achieve, but also, he says, not always necessary. “You can definitely enter the market with minimal to no down, and it doesn’t necessarily mean it has to be a government-related program. We have a new affordable home program through Fannie Mae, it’s called Home Ready, it doesn’t require you to be a first-time home buyer, and you can also own other real estate. The minimum down on that is 3%, and it’s a conventional-type loan, so you have pretty good credit. For someone that has a 680 or above, you get premium pricing, you get reduced rates on your PMI, and, essentially, you can almost use a tax refund to get into a home.” This poses a huge opportunity for buyers who have good credit but aren’t able to put down a large initial payment, and helps to make the market accessible to a wider range of buyers.
Armed with this knowledge, a buyer has every opportunity for success when buying a home in Asheville – even in a seller’s market. The process is, however, a complex one, and potential buyers are likely to have questions and concerns. Adam encourages anyone with an interest in financing a home to reach out to professionals like those at Prime Mortgage Lending of West Asheville. To connect with Adam, visit GoPrimeAsheville.com, call his office at 828-348-1907, or stop by the company’s retail space in West Asheville at 862 Haywood Road.
And, as always, feel free to reach out to Asheville Cash Buyers with your questions by calling us at 828-581-9316 or visiting AshevilleCashBuyers.com!