Unless you have a lot of cash sitting in a drawer at home, you will need to know how much money you will be able to borrow for your new home.
Times have changed! The economic situation of the past few years has caused mortgage lending to revert back to the way it was in the old days: you have to qualify for a mortgage and you need some kind of down payment, although you can buy a home with as little as 3% down in some cases.
An important part of preparing to purchase a home is understanding how much you can, and want to, pay for it.
Fortunately, most lenders are willing to “pre-qualify” you with no obligation. This can typically be done over the telephone, in which case you simply give the mortgage officer your income and debt information and they tell you which loan you qualify for and how much you can borrow.
The general rule is that you can qualify for up to 28% of your gross monthly income for your mortgage payment, or up to 36% of your income for your total debts including house payment.
There are many types of mortgages to choose from, and one will fit your particular situation.
To compare loans and find out how much that house will cost here is a link to mortgage calculators. Bankrate has lots of useful information, including the latest interest rates. we can discuss with you your financial objectives and help you come up with a mortgage plan that can meet your specific needs.
The pre-approval process is a little more complicated, but can save you a lot of trouble when you are ready to make an offer on a home because it shows the seller you are already approved for the loan. The loan officer will pull a credit report and see if you have any credit problems. Unfortunately, errors on the credit report are not unusual so check it carefully.
Errors on the credit report can usually be easily corrected by contacting the offending institution. Ask for a copy of the correction to be faxed to you and keep calling until you have evidence that the error has been removed. Legitimate credit problems can sometimes be explained to the satisfaction of the lender, particularly if they occurred at a specific time period due to an isolated incident.
Chronic late payments will make it difficult for you to get a mortgage. Try to be sure that you make all of your debt payments, including and most importantly your rent payment, in a timely fashion for at least a year before you purchase a home. Often a lender will overlook a previously poor credit history if payments have been up to date for twelve months or more.
If you’re ready to start the pre-qualification process let us know, and we can help you find the best lender for your needs.