When you are ready to buy a home, the first question you ask is: “how much home can I afford?” And like most Buyers you will begin your search online and utilize a home affordability/mortgage calculator which yields you a ballpark figure of what price range of home you should be looking at. Yes, ballpark.
Once you obtain your ballpark figure then you start searching on the internet for available homes for sale in your dream neighborhood. You find a perfect home or a few, that are perfectly priced, filled with the amenities you seek and in your ideal neighborhood. Naturally, you are very excited so you call the listing agent(s) to set up a tour. And nine times out of ten you will lose out on your perfect home. Why? Well it’s simple. You started shopping and were not prepared to buy. And from that point forward you will always compare each and every home you see with your perfect home that got away from you. And if you end up buying, you will settle.
So how much home can you afford?
The question is better posed as: What is the best way for to determine whether I should buy and how can I buy a home? By taking a few simple steps you will save yourself serious aggravation an disappointment.
So do you want to know how to buy a home the right way, without the stress and frustration?
HERE’S WHAT YOU WANT TO DO:
Unless you plan to buy a house using all cash and you have the cash readily available, you will need to obtain a mortgage loan to finance your purchase (just like buying a car). The process of getting approved isn’t that complicated, however, there are several variables from your personal financial history that will factor into determining how much home you can buy. Specifically:
- Your income
- Your employment (time on job; typically 24 mo. doing the same job and/or in school for the same job)
- Your credit rating (FICO score from a tri-merged credit report; Experian, Equifax & Trans Union)
- Your existing debt (gather all of your bills, know your balances & monthly minimum payment(s))
- Your down payment (gather all your asset statements (checking, saving, 401k, other)
To those existing factors, add some variables of the housing market, and your own choices as you plan to assume a mortgage:
- The mortgage amortization term (fifteen years, thirty years, etc.)
- The current interest rate
- Private mortgage insurance (if your proposed down payment is an amount less than twenty percent of the price)
- The current real estate market where you live or want to live (supply & demand, dynamics (Sellers market, Buyers market)
- Closing Costs (property taxes, fire hazard insurance, appraisal, loan fees, notary, escrow, title insurance, etc.)
So as I mentioned above, the online calculator will give you a ballpark figure. But that’s it… it’s only a rough estimate. What you absolutely must do is obtain a loan pre-approval from a “trusted” mortgage professionaland know exactly how much home you are approved to buy. Or at minimum establish a game plan for the future so that you can eventually buy.
Your lender will take all the same factors into consideration but instead of a guess, your application will have been processed by an underwriter (http://goo.gl/2wJBJh) and you will have a firm number in hand when you begin to look at homes with your REALTOR®. By completing the loan pre-approval process upfront with the right professionals you will alleviate any unpleasant surprises when you bring to the table an offer on the home of your dreams.
I say “trusted” mortgage professional because in the past I have had Buyers use a lender not personally known to them or use a lender not referred to them by someone that the Buyers trusted. These Buyers got into escrow and then lost their deposit when they could not close the transaction, and that is more than a unpleasant experience, it’s a pretty miserable one.
Remember, time is always of the essence—because you ALWAYS have competition for the purchase of the home you have your eye on. So save yourself serious aggravation and disappointment, eliminate any surprises, and insure to your agent and the seller’s agent a high level of confidence in your ability to move quickly on a house when you do find the right one. Take the few steps necessary to obtain your loan pre-approval from a “trusted” mortgage professional because nine times out of ten, the buyer who first brings money to the table is the buyer who actually walks away the victor.
* see my other Blog article: The top 10 tips you need to know when buying a home.
Contact Vianey Ojeda to find out more:
(909) 294-7265 | firstname.lastname@example.org | www.testsellyourhome.com
Certified Luxury Home Marketing Specialist (CLHMS)®
The Hanover Group at Keller Williams | Rancho Cucamonga
Board of Directors – Citrus Valley Association of REALTORS®
CLHMS – Million Dollar Guild®
O: 909.945.0641 | D: 909.294.7265
BRE # 01259267