Getting Prequalified

If you want to buy, it makes sense to find out how much you can borrow. If you apply or qualify for a loan, you'll know how much you can afford, you'll strengthen your position as a buyer, and you'll have a basis to compare different loans and make the best choice for you. This may mean tremendous savings over the life of the loan. It also makes sense to secure a lender's commitment as soon as you know that you want to buy, especially in a hot market, when houses are selling fast.

Find out how much you can really afford: You may be able to afford more than you think and you'll know what all your costs will be so you can stay within your budget.

All lenders compare your total housing expenses to your "usable" income in order to come up with a debt ratio. Lenders adopt various guidelines for acceptable debt ratios, but a good general rule is that your total housing expenses should not exceed 33-36% of your income.

Housing Expenses

Principal and Interest Payments - Your monthly Mortgage Payment(s) are only one part of your total housing expense.
Real Estate Taxes - Real Estate taxes are due twice a year, but lenders divide the annual total by 12 to come up with a monthly figure.
Hazard Insurance - Minimum insurance coverage is mandatory if you have a loan on your house. All lenders divide your annual hazard insurance premium by 12 to come up with a monthly figure.
Homeowner\'s Association Dues (HOA) - If your property is part of an association, then you must consider the monthly dues as part of your housing expense.
Private Mortgage Insurance (PMI) - If you obtain financing that requires you to pay PMI it must be considered to be part of your total housing expense.

Other Expenses - Some specific types of loans require monthly payments (usually insurance). So remember to include any payments tied to your loan in your total housing expense.

All lenders look at your monthly debts like car payments and credit cards too! The sum of these monthly obligations is added to your total housing debt. Lenders have various guidelines for acceptable "back end" debt ratios, but a good general rule is that the sum of your housing expense and your other debts should not exceed 43% of your income.

Other factors in qualifying include: employment stability, credit rating, savings, and income type. Always be sure to get qualified by a reputable lender and remember that most lenders offer programs that can be tailored to fit your specific needs. Even if you think you can't qualify, you need to understand where you actually stand.

Make yourself a stronger buyer! You have an advantage as a pre-approved buyer because the seller knows you can get the loan and close the deal and they will consider your offer more seriously. Not only will it help Ric negotiate a better deal for you, it may make all the difference on a desirable property with multiple offers.

Even if you're not ready to purchase, speaking to a lender now may help you develop a plan to get you into your new home within 6 to 12 months. Many lenders can help guide you through some unfortunate credit issues to better your credit rating (FICO score) as well.

In any event, please call or email Ric for a referral for a good lender or mortgage broker.