How do I know what I can afford?
The best way to know which homes you can afford is to
make an appointment with a lender at your bank, or a
mortgage broker, and get pre-approved for a mortgage.
WHAT DOES IT MEAN TO GET PRE-QUALIFIED?
Pre-approval means simply that a qualified lender will
look at your credit history and income, compare it with
your current monthly obligations, and see what you can
realistically afford. It does NOT mean you have already
been approved for a loan, rather it is a predictor of
the likelihood you will get a loan.
SHOULDN'T I FIND A HOUSE I
LIKE FIRST??
NO! SPEAKING WITH A LENDER BEFORE YOU HIT THE STREETS
WITH A REALTOR WILL BENEFIT YOU IN THE FOLLOWING WAYS:
YOU'LL AVOID DISAPPOINTMENT:
Pre-approval helps you know which houses you can realistically
afford. Learning about credit report errors, high debt
balances, and an insufficient down payment early will
give you time to correct the problem before you apply
for a loan, and before you fall in love with a house
you are unable to purchase.
YOU'LL SAVE TIME: Knowing
ahead of time what you can afford helps narrow the choices,
which means you'll find what you want faster and with
less run around.
YOU CAN PLAN WISELY AND ESTABLISH
PRIORITIES. No home is going to be perfect,
no matter how much you pay. Going through the pre-qualification
process helps you focus on which of the features in
a home are most important to you, and helps you plan
your search based on your pre-determined criteria.
YOUR OFFER WILL BE MORE ATTRACTIVE
TO THE SELLER: They'll
know you can afford it, and, if they have more than
one offer, they'll be more likely to accept yours if
they know your financing is in place.
YOUR CLOSING WILL GO SMOOTHER:
Lenders can detect any potential problems that might
make obtaining a loan difficult. If there is something
in your credit which could keep you from qualifying
for the home you've chosen, it should have been identified
and dealt with during the pre-approval process. By the
time you get to closing there is less likely to be any
surprises, which would hamper your ability to purchase.
(Keep in mind, a lender will most likely pre-approve
you at the top of your ability to buy, which means that
homes that you consider must be in that range or lower.
If you try to go significantly over your approval rate
by more than five or ten percent, you will risk losing
the home, and possibly the opportunity to buy a home
that would have been more suitable).
