You’ve made that very personal decision, to consider buying a house of your own! You may have put off this moment, for a variety of reasons, including; indecisiveness; geographic; job-related; financial, etc., but now, you think, you’re ready! So, what should you do first! The logical first-step is to discuss finance, and the all-important mortgage information, with a qualified mortgage broker or banker. If you have received a recommendation from someone you trust, and is knowledgeable, begin with a conversation with that professional. If not, interview, and hire, a real estate professional, who will take care of your needs, and provide you with recommendations of reliable mortgage professionals. Either way, be certain to get a Mortgage Pre-Approval, before you begin your quest for the house of your dreams.
1. A pre-qualification is not a pre-approval: Beware, there is huge difference between being pre-qualified, and pre-approved! The former means that based on the basic information you have provided, you would be able to qualify to get a certain size mortgage. On the other hand, the latter means the broker/bank, has done a thorough review of your income, liabilities, etc., as they would before they issued a mortgage, and, as long as the house comps out, you will get a mortgage.
2. Other debts/liabilities: Lending institutions use a formula to determine how much mortgage one might qualify for. It takes into consideration all debt owed, and that combined with your new mortgage debt, cannot exceed a certain percentage. That is, in addition to, the mortgage must fall within a certain percentage of one’s income.
3. What can you afford as a down-payment?: Traditionally, you are asked to put down 20% down-payment, and you can then use your mortgage for the balance. However, there are loans available, which require less down, but that means a higher monthly payment! You may also be in a position to put down more, and carry a smaller mortgage. This must be a combination of what you can actually afford, as well as your comfort level.
4. What can you afford monthly: The lending institution will come up with a maximum figure, they say you can carry monthly. They base this as a percentage of one’s income. However, you may not feel comfortable with that amount of debt, so you must take that into consideration. All this valuable information will help you decide the price ranges you should look at, when you search for a home.
5. Move to the front of the line: Let’s say you’ve taken into consideration the above information, and now are prepared and ready, to begin your search, in earnest. You have searched, and found the house you want, but others feel the same way. When there are competing offers, the buyer with a Pre-Approval, often is given more consideration, because it is considered a better bet, for the seller.
It is the responsibility of a qualified real estate professional to help you find the right house, at the best available price, with the least amount of hassle or wasted time! Make it easier on yourself, by beginning properly, by getting a Mortgage Pre-Approval.
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