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Get a loan before finding a house?

I'm currently trying to sell my home, and will of course buy another as soon as I do.  It looks like these rates won't return any time soon.  Is it too early to get a loan lined up?  What happens if I lock, but havent sold yet, and thus cant buy yet?

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February 19 2010 - Austin
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Best Answer
There is no point in locking the loan if you aren't sure when you will be closing.  Longer rate locks are more expensive then short ones, and without knowing when you will be closing it will be tough to pick a lock period.  On the longer locks most lenders charge a nonrefundable lock fee, so if you lock and then don't close you will lose the money you paid for the lock.  Also, if your lock expires you will either have to pay to extend it or take worst case pricing on the relock.  Worst case pricing means if rates have risen you get the higher current rate.  If rates have dropped you get the original rate you locked at.  It's kind of a lose-lose proposition for you. 

The other alternative would be to buy now, assuming you can qualify with both house payments.  If you need the sale proceeds to make a larger downpayment you could get a first loan for the amount you want to finance and a second for the difference up to 95% LTV which you could payoff when you sell your current residence.  Then you could buy now with only 5% down.
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February 19 2010
Some lenders may have a "lock and shop" program for you to consider.  It will give you a guarantee you the rate not to exceed the certain amount.  Once you find the home of choice, they will then lock you to the current rate, but no worse than what is guarantee to you.
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April 13 2010
Technically, some lenders will allow you to lock while you shop, but it's expensive enough that when I've quoted it in the past, my customer's have always decided against it. Wells Fargo had a Shop Lock and Roll program that might still exist. But the fee was non-refundable. Basically when you lock, your lender's secondary marketing department is engaging in a hedge on your behalf. There's a real cost behind it. Most normal locks with an identified property are "free" to the extent that the lender has already priced fall out into their profit margins. But with no property identified, there's the real risk that you'll never close, which is why they charge the upfront fees.
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April 05 2010
You cannot lock a loan until you have the exact subject property located.  Lenders will not allow you to just lock based on a to be determined property.  Locks are based on a specific property address and you lose hte lock if you do not purchase that property with the rate lock.
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April 05 2010

First step will be getting pre approved.

Discuss with your lender and see if you can qualify for both houses. At that point you can make an informed decision either to wait until your house sells or proceed with the purchase.

There is no point locking if you have to sell your house before you can buy a new one.

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February 20 2010
Wayne Brown,

I heard that only Debbie does TX - or, was that Dallas? #: >)
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February 20 2010
josh

Before you sell, ensure what you can do Prior to Sale.  I am sure that you will be fine, but Double check to be sure.

Unfortornately, I do not do Texas, but there are fine L/O's here on Zillow.   Look to the Right of Your Screen.  These guys are great, but you can also search for more in your area thru Zillow.

Nic and Martin are reall straight arrows. Almost for got Texas Banker.  He's straight too.

Good Luck.
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February 19 2010
I would strongly urge you to get pre-approved before you sell your home. It doesn't happen often but occassionally a seller can't qualify for another home because of income, credit score, asset, loan to value, etc etc changes that may have ocurred in in loan programs in recent times. There is typically no cost for pre-approval so a win-win.
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February 19 2010

Josh:

I agree with Erez as well.  I wouldn't worry so much about rates as long as you are able to sell and hopefully buy within next 6-12 months.  Rates aren't going to spike so far up on the short term most likely.  In fact there is talk of a dip in rates coming if things don't really start to improve.  Good luck on your sale and make sure you come back to Zillow for a quote on the impending purchase.

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February 19 2010
Here is the bottom line answer- 
1) Definetly get pre qualified now with the Caveat of the sale of your current home as a pre condition for financing.
2) You cannot lock anything in yet because a) you do not have a contract, and b) your current home is not under contract, and c) you indicate you must sell your current home in order to buy the new home.
3) Locking doesn't cost you a thing.  I would only suggest doing so once your current home is under contract you have a new contract for the new purchase-

FYI-  If you can qualify now with your current mortgage payment and that of the new home you will purchase then locking now is doable if of course you have a contract on a new home you plan on purchasing.
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February 19 2010
Hello Josh,

It does make sense to get pre-approved.  At this point you cannot lock in a rate.  That can only be done once you find a property and it is under contract.  As a Realtor and  a lender in Austin it is always best to know upfront that you are approved as lenders are changing their guidelines more often these days.  It will also speed up and streamline the process when you find the next home you would like to purchase.
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February 19 2010

That all depends if you can handle both payments meaning do you have the ability to acquire a property and retain the existing? If not look into reducing your rate on your existing and cashing out if oyu need to.

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February 19 2010
It is wise to go ahead and get pre-qualified for the loan on your new purchase.  However, without a property address, you can't lock in a rate. 

Rates inevitable have to rise from where they are, but it won't happen overnight. 

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February 19 2010
 
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