1.  SAVE FOR A DOWN PAYMENT

Nearly all mortgage loans and lenders require some amount of cash as a down payment. The amount you’ve set aside for this will determine the kind of mortgage you qualify for. It will also impact how much you can afford to borrow for a home.

2.  CALCULATE WHAT YOU CAN AFFORD

Consider Your Income

Many banks will require that your monthly costs can’t exceed a percentage of your income (for example 28%). That means if you earn $50,000 per year, your total monthly housing costs should not exceed $1166 (28% of your monthly income). Using a mortgage calculator you can use this number to figure out how much you can afford.

Consider Your Debts

In addition to your income, if you have recurring debts, the total monthly payments on existing debt plus new payments for your mortgage may not be allowed to exceed a certain threshold (for example 41%). Using the example above that would mean that if your monthly debt payments are in excess of $541 per month (bringing your total debt of $541 + $1166 = $1708 or 41% in total)

Consider The Down Payment

Most lenders prefer a down payment of 20% or higher to qualify for a conventional loan, but there are loan options where you can put down less between 3.5% or higher, and even as little as 0% down with a VA Loan. However, you should be aware that with a smaller down payment, you’ll likely be required to pay for mortgage insurance, and your loan application will be subject to greater scrutiny.

3.  GET PRE-APPROVED

By this point, you should have a pretty good idea about what kind of home you’re looking for, and the neighborhood you’d like to live in. You also know how much you’ve saved for a down payment, which in turn will determine the type of loan you should pursue. If you’ve compared a few rates you should request a pre-approval letter.

Getting pre-approved for a mortgage loan requires that you select a mortgage lender to work with and obtain your loan. Essentially, mortgage pre-qualification is a promise from the lender that you’re qualified to borrow up to a certain amount of money at a specific interest rate, subject to a property appraisal and other documentation.

In today’s competitive housing market, it is not uncommon for a seller to receive multiple offers on their home. Your Real Estate Agent will require you to have your Pre-Approval before previewing homes.  Having a pre-approval letter in hand could be the difference in your ability to purchase the house you desire, and provides you with bargaining power which is likely to give you an advantage over other buyers.

Contact Hayden McBride, Mortgage Lender, for a complimentary quote.

(949) 835-0882

Hmcbride@breezefunding.com