Pre-Qualification: Knowing What Home Mortgage You Can Afford
It used to be that a buyer could afford a home that cost two and a half times his or her annual salary and that the down payment was a minimum of 20 percent of the purchase price. Today, the situation has changed. These days, we finance our home purchases with a residential home mortgage, sometimes buying a home with 100% of the purchase price financed. Today, the home mortgage amount you can afford to spend on a house focuses on how large a home mortgage you can afford. The issue of what you can afford usually boils down to one question: what can you afford to pay each month? We can help you calculate your gross monthly income, housing expenses, living expenses, and any long-term debt, so you can determine how much you'll have available each month to spend on a home mortgage. Get a Home Mortgage Pre-qualify today!
The Home Buying Process
Before you begin the home buying process, there are several key steps to help make your home buying experience run smoothly. First, you should figure out what you can afford. Estimate how much you can afford - and what your monthly payments on your home mortgage will be. The traditional debt-to-income ratios on a home mortgage are 28 and 36 percent. This means that your total monthly housing payment - including home mortgage principal and interest, insurance, real estate taxes, and any condo monthly assessments - should not exceed 28 percent of your before-tax monthly income. Then, when adding in all other consumer debt payments, the total figure typically shouldn't exceed 36 percent of your gross monthly income. However, each person's financial situation varies, so discuss what's right for you with a loan advisor.
Reduce Your Debt
The fewer credit cards you carry - and the lower the balances - the better. That's especially true if you have other debts such as a car or student loan. However, don't pay down or pay off balances with cash intended for a down payment. Even if you choose a low-down-payment home mortgage option, you're going to need cash available to pay the down payment and closing costs. The easiest way to generally improve your debt picture is to close all dormant credit card accounts. Contact card issuers and ask for instructions on closing the accounts. Instruct the card issuer in writing to enter into your credit report, "Closed at the request of cardholder." That way, there won't be any reason to suspect that a credit problem caused the account to be closed.
Solidify Your Savings
It's important to understand if some problems or errors could affect your ability to qualify for a home mortgage. It's never too early to review your spending, cut out excess spending and set a budget.
Review Your Credit
It's important to understand if there are problems or errors that could affect your ability to qualify for a home mortgage. To do this, you'll want to obtain a copy of your credit report. Because these reports contain your credit history, it's important that you're aware of what they contain - and whether the information is accurate. You might have excellent credit, but it is not uncommon to find an error in your report. Look for mistakes, such as accounts that are not yours. When you find errors, contact the creditors by phone or mail to correct the error. Then get another copy of the report 30 to 60 days later to make sure the corrections have been made.
Once have completed the above checklist and we know what you can afford, We will pre-qualify you, which provides you conditional proof of your ability to get a home mortgage from us, up to a specified amount. Although our pre-qualification letter doesn't guarantee a specific home mortgage to you, it does give you a rough idea of where you stand - and puts you one step closer to a purchase. Contact us today to get the pre-qualification process started, and take the first step toward purchasing the home of your dreams with a home mortgage.
There is more to understanding the home mortgage process than simply finding a home, making an offer, and closing the deal. That's why we are here to make things easier on you during your search for the right home mortgage.
There is more to understanding the home mortgage process than simply finding a home, making an offer, and closing the deal. That's why we are here to make things easier on you during your search for the right home mortgage.
What Can You Afford?
The first part of the home mortgage process is finding out how much home you can afford. Then you have to decide if you want a Fixed Rate Mortgage or an Adjustable Rate Mortgage. This is based on how large a down payment you have and what kind of monthly payments you can afford. When you contact us, we'll work with you to compare your monthly income with your monthly obligations (debts) and determine how much you'll have available each month to spend on a home mortgage. This information will give you a great place to start. It also means you're less likely to suffer the heartache of falling in love with a home you can't afford. You might have to look into Fixed Rate Mortgage IOs or Interest Only loans.
Documentation
We'll tell you exactly what documentation you'll need to have on hand when the time comes to secure your home mortgage. We'll even pre-qualify you. Being pre-qualified means you have conditional proof of your ability to get a loan from us up to a certain amount, which puts you one step closer to purchase with a home mortgage.
Finding Your Dream Home
Now you're ready to house hunt. Find the house you can afford and wish to purchase, make an offer, and come to an agreement. However, before to beginning the house-hunting process, you should consider working with a buyer's broker/real estate agent, who will represent your interests and not the seller's. This individual should be able to provide you with valuable information regarding the neighborhood of your dream home, current housing prices, negotiation advice, etc. You can also let them know you are working with us to secure a home mortgage. To get the home mortgage you need, just provide us with a copy of your purchase agreement and a completed loan application with all required documentation. We will promptly process your home mortgage and if all requirements are met, soon you'll be one of America's new homeowners.
