You may think you know what you can afford, but  factors such as your income, credit scores and credit play a role in determining how much home you can qualify for and afford. You don’t want to discover that after you have put in an offer on your “dream” home that you don’t qualify for the size of loan you need or that there are other complications related to your credit or other credit worthiness factors.

Mortgage Pre-Approval Before You Shop

When you get pre-approved for a mortgage through a mortgage lender, the lender does a complete financial review and provides you with the maximum price you can spend on your home. When you have this number in mind while house hunting, there are the following benefits:

• You can begin your house hunt with reasonable expectations based on what you can truly afford
• When submitting an offer on a home, you know exactly how much you can bid during the negotiations

Pre-Approval: Insurance When House Hunting

There are buyers that believe a pre-approval is only beneficial to make them more credible when making an offer. If the above teaches you anything it should be that getting pre-approved makes you more informed and reduces the stress of your house hunt and insures you aren’t using inaccurate figures when setting a home price that you believe you can qualify for and afford.

You have enough to focus you energy on, the last thing you need to worry about is getting your financing confirmed right before you make an offer on your home when there are other offers and your offer is time senstiive. Getting pre-approved is the first step you should take before house hunting.

The last time the index was higher than 100.1 was in April 2010 when it reached 111.5. This prior record was fueled by buyers that were rising to meet the deadline for the home buyer tax credit that was expiring.

About the Pending Home Sales Index

Pending Home Sales Index (PHSI) is released during the first week of each month. It is designed to be a leading indicator of housing activity.

The index measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. A signed contract is not counted as a sale until the transaction closes. Modeling for the PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years.

How This Affects Potential Home Buyers

There have been some signs in the past month that housing may have put in its bottom. If this turns out to be the case, potential home buyers that are sitting on the sidelines may do better to purchase their home sooner rather than later. Once there is strong confirmation that a bottom has been reached, it is very likely that even more buyers will rush into the market (some Realtors are already reporting the lowest housing inventories in years) which will push housing prices higher very quickly.

Before You Shop: Get Pre-Qualified

The first step in shopping for your new home is understanding how much home you can afford. This prevents you from falling in love with a home that is not an option. Getting pre-qualified means you know what your budget is, which means you can save time and money only looking for homes that are truly a fit for you. Getting pre-qualified is free and only a phone call away, please don’t hesitate if you have any questions.

Insure that you are a smart first-time home buyer by avoiding some common mistakes:

Mistakes to Avoid as a First-Time Home Buyer

• You Can’t Get Over the Decor – Don’t allow the paint colors or the furniture in a home to sway you either way. The current home owners will take their furniture with them, and paint can be easily changed. Try to picture yourself in the home to determine if it’s the right fit.
• Skip an inspection – It doesn’t matter how the home looks on the surface; you need a home inspection when purchasing ANY home. You don’t want to be surprised by issues down the road that may have been deal breakers.
• Rely on Verbal Promises – The only agreements in a real estate transaction are those put in writing. Just because there is an unwritten agreement that you ‘may’ be able to occupy the home before your official closing date, does not mean anyone is obligated to abide by that. Put the important details in your offer and subsequent contracts and you will have better guarantees.
• Get Approved For a Mortgage After You Make an Offer – It is important that you get pre-approved for a mortgage before you actually start shopping for a home. We can help you get pre-approved in minutes.
• You See the Home Only One Time – Make sure you schedule a walk-through of the home before you take possession. You never know what condition it will be in when time has elapsed between the initial viewing and the closing date.
• You Jump on the First House You Like – Seeing a number of houses will help you get your priorities in order. Visiting multiple homes even when you find one you like will help you to think with your head as well as your heart.

1. Your Credit Score

Your credit score plays a major role in the type of interest rate you’ll qualify to receive. While different programs have different credit requirements, the rate you pay may increase or you may be disqualified altogether if you do not meet a specific program’s minimum or preferred credit score standards. If you find that you are having trouble qualifying for a mortgage, you might qualify for federally supported loans from Fannie Mae or similar institutions.

2. Available Liquid Assets / Reserve Cash on Hand

The amount cash reserves you can show to the lender are also important. Cash reserves help show that in case there is a disruption in your income, you will be able to maintain your monthly payments.

3. Your Down Payment Options

Another aspect to consider when applying for home loans is your down payment. Different lenders will require certain amounts in order to agree to giving you a loan.The higher a down payment you can afford to make  will not only help you in the long run, but give you an edge when applying for financing. Most financial institutions would prefer a down payment of anywhere from 10 to 20 percent in order to assure a good interest rate although this can vary by program. In difficult economic times, more and more banks are asking for the buyer to put more money down. Government-backed loans allow you to put less money down initially, but also carry higher monthly rates.

It’s important not to be discouraged if your credit score is lower than you anticipated, or if you can’t afford a large down payment. You can investigate other loan options, or even try to find ways to improve your credit. Improvement won’t happen overnight, but it can happen if you have patience. In fact, we can help you improve your credit score and help educate you on how to improve and maintain high credit scores in the future.

The Offer Process

In many ways the offer process is straightforward. You determine a price you’d be willing to pay, add any conditions or requests you’d like the seller to consider, and then allow your agent and possibly a lawyer to review it before it’s submitted. If you’re submitting an offer without having secured financing, there are other actions you need to take, including showing proof of income.

Once your offer is accepted by the seller, there are only a couple of reasons why you’ll be allowed to back out of the deal. Some purchases are contingent on financing, while some are contingent on the results of a home inspection. If neither party backs out, however, you go to closing.

What is Closing?

Closing is the name given to the time when your home purchase becomes final. In order to close your mortgage needs to be approved, and you must officially turn in your down payment and checks for closing costs. Sometimes you’ll be able to sign the final contract early, but often that step has to wait until closing day. Your closing day is the day you receive your keys and your house is officially in your name. That’s the day when your home search is truly over.

Need Help With Your Home Purchase?

We can help you pre-qualify for a mortgage and help you understand what mortgage rate you would qualify for. More importantly, we can help you establish how much home you can afford. Since rates are near or below 2011 lows, now is the time to lock in extremely low rates before they are gone, which is not a question of if, but when.

Another great reason to get quaified as early in the process as possible is to insure the fastest closing possible. If there are multiple offers going in on a home, you may be at a disadvantage if you are not able to secure financing quickly. Don’t wait until the last minute!

We have home purchase specialists standing by that can give you FREE home purchase finance advice. Feel free to request a FREE Rate Quote or to Contact Us directly.

cforms contact form by delicious:days