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The Brilliant Buyer: Financing First

In today’s tech-driven world, the process of searching for a home has become as simple a few strokes on a keyboard and a click of the “search” button. The internet has opened up the real estate marketplace to anyone and everyone who has a computer at their disposal. It’s very easy to log on to your favorite real estate website and dream about owning the alluring properties. Buyers beware: It can be easy to get caught up in imagining how you would decorate the kitchen in this home, or how well your couch would go with the wall color of that home… Home ownership is an attainable dream, but only if the right steps are taken in preparation. So what is step one? Meeting with a lender and finding out just how much house you can really afford.

Unless you’ve got a background in accounting or finance, you might not have any idea what kind of mortgage payment you can afford on your income, or the type of loan you qualify for. Alternatively, you may have a very clear picture of what you would like your home to look like, but aren’t sure of what it would take financially to get there. Meeting with a lender will clarify that for you. There are levels of qualification that you can utilize depending on your readiness to buy. For example, if you’re just toying with the idea of purchasing, but would like to know how realistic it really is for you, it would be a good idea to get what is called a “pre-qualification.” Pre-qualification looks at your overall financial situation without getting too in-depth. It can give you a ballpark figure of what you can afford without having to dig up old tax returns and run credit checks. If you feel confident that now is the right time for to buy, you’ll want to obtain a “pre-approval letter” from the bank. This is a document of commitment from the lender stating they will lend you the money you need for your purchase. The amount is based on various calculations utilizing information about your income, expenses, credit score, and financial history. Often times banks will require you to submit two to three years of tax returns, recent pay stubs, a credit check, among other items, for review and from there they can give you an accurate idea of what you can afford. Regardless of which point you’re at right now, meeting with the lender will give you a clearer picture of the price range you should be shopping in, if you should be shopping at all. The lender may tell you that there is work to be done before you will qualify for a loan, and will be able to counsel you in ways to prepare financially. I would also recommend shopping around for lenders. Interest rates and closing costs vary from lender to lender, so doing your homework could pay off in the end.

lending handsMeeting with a lender and exploring your financial abilities to purchase will give you critical insight into your purchasing abilities. Knowing what you can or cannot afford can help to avoid disappointment and frustration down the road. Understanding the differences in loan types is important as well, as some of them have stricter requirements for properties than others, scratching some properties completely off of the “possibility” list. Having that letter of commitment from your lender can be a powerful tool when it comes time to make an offer on a home. It communicates to your REALTOR that you have done some work and are sincerely preparing to purchase a home, and comes in very handy when you are ready begin the purchasing process, as your REALTOR will oftentimes send your pre-approval letter along with your offer to express to the sellers that you are a serious buyer. Having the right information at the right time can set you up for an smooth, efficient, and successful home buying experience. Meet with your lender today!