Pre-approval will also
help your real estate professional know what price range to keep
your home search within-and it gives you a great negotiating tool
when you are ready to make an offer. In competitive situations,
a pre-approved mortgage could make the difference between getting
the home of your dreams, or losing out to someone else.
Buying a home can be an enriching experience. But, it can also
be frustrating if you waste time looking at homes you can’t
afford. Do yourself a favor and find out how much you can afford
before you start looking.
Three factors will determine your price range. The first is the
amount of cash you have for a down payment and closing costs. The
second is the size of the mortgage you can qualify for. The final
factor is how much you want to pay.
Although some buyers can pay all cash, most must borrow a mortgage
from a lender to finance their home purchase. To qualify you for
a mortgage, a lender will analyze your financial situation, including
your credit history, to make sure that you are a good credit risk.
The easiest way to find out what size mortgage you qualify for
is to talk to a lender or mortgage broker. To find a good lender
or mortgage broker, ask friends who purchased or refinanced a home
recently for recommendations. You may want to talk with several
people. There’s no obligation to use the person you initially
speak with.
Assemble the following information about your current financial
situation before you make any calls: Your gross income (before income
taxes are subtracted), your outstanding debts (i.e. a car or student
loan and unpaid credit card bills), any recurring obligations such
as alimony or child support, and the amount of cash you have available
for a down payment and closing costs. Based on this information,
a lender or broker can tell you how much you can afford.
This cursory review of your finances is called prequalification.
Once you’ve been pre-qualified, you can start looking at homes
for sale. This will give you a sense for how much house you will
get for the price you can afford to pay. But, as soon as you are
serious about buying, you should get formally approved for the mortgage
you’ll need to complete a purchase.
Pre-approval is the process by which you are formally approved
for a mortgage. You will need to submit a loan application, and
the lender will need to check your credit history and verify all
of your financial documentation. Pre-approved buyers have
an edge in home purchase negotiations because pre-approval lessens
any uncertainties the sellers might have about your financial capabilities.
HOUSE HUNTING TIP: Buyers often find that they qualify for a higher
price than they feel comfortable paying. So regardless of how large
a mortgage you qualify for, you should review you personal financial
goals to determine a realistic price range. |
