Getting pre-approved for a loan makes you an appealing buyer in the eyes of the seller.
When you are pre-approved by a bank, you are approved for up to a certain mortgage amount, even before you look at your first home. Once you do start looking, you won’t waste time looking at homes you won’t be qualified for, and you’ll be in a strong position to make an offer as soon as you find something you like.
Selecting the best financing package available is as important as finding a home that meets your needs.
There are three factors to consider in determining how much you can afford:
Our best professional advice is to shop with different reputable banks for your mortgage. Compare the annual percentage rate (APR), which includes the total cost of the loan and will give you an apples-to- apples comparison. Ask about “sales” they are offering. The lender may be working to attract buyers with jumbo loan needs or first time home buyers, for example. Then negotiate with the loan officer so you get the best rate and terms being offered.
- Down payment and points
Different lenders offer different mortgage programs that can include down payments ranging from 0 to 20 percent. Ask if you increase your down payment, will you get a lower interest rate. Are there points associated with the loan? If you pay a point, will it decrease the interest rate and save you money over the life of the loan? These are a few of the questions the Magnificent Manors Team will help you with as you shop for a mortgage.
- Ability to qualify for a mortgage
Most lenders require that your monthly mortgage payment, including principal, interest, taxes and insurance, not exceed a certain percent of your gross monthly income. They also expect your total installment debt (regular scheduled payments of 6 months or longer debt-car loans, credit card balances, etc.), including the proposed monthly mortgage payment on your new loan, not to exceed a certain percent of your gross monthly income. Ask your loan officer about these percentages so you understand how they apply to your circumstances.
The lender will request a credit report to verify your debt repayment, outstanding debt, and available credit. They will calculate your assets, including checking and savings account balances, and stocks and bonds, in addition to looking at your salary.
Avoiding any late payments on credit accounts, student loans and medical bills and limiting your credit purchases, helps keep your credit report in good standing. Check your credit report to see if there are any errors. If so, work to correct them immediately. If you have items on your credit report that could negatively influence your ability to secure a mortgage, be prepared to explain each situation in writing. You should also consider delaying major purchases until after you’ve moved into your new home.
- Closing costs
Closing costs typically range between 2 and 3 percent of your loan amount. These fees are due in cash at the time of closing, or, in some cases, can be included in the loan or covered by a seller credit..
Pre-approval is always a good idea.
Taking the time to get pre-approved for a mortgage before you begin your home search will put you in a much better negotiating position: your pre-approval assures the seller that the transaction will not be delayed while you secure financing.
You can get an idea of how much your monthly payments will be by completing our Mortgage Calculator here. Using this mortgage calculator will give you the information you need before contacting a loan officer.
If you would like to learn more about financing options, please contact a member of the Magnificent Manors Team. We would be happy to help you answer any questions you have and provide you with a list of our preferred lenders who have helped other clients with well-priced mortgages and successful on-time closings.
