This
is the time that you need to determine how much you can afford
to pay for it.
The answer to this question will depend upon how much you can reasonably
afford pay to support a mortgage out of your monthly budget.
Once you have
a handle on this amount, it is relatively easy to know the size
of mortgage that you want to apply for, but what you believe you
can reasonably afford, and what your lender will allow you
to borrow may differ.
By example,
if some of your income is earned “off
the books”,
it is not verifiable and your lender will not consider
this unverified income available to support your mortgage.
Your lender
is required to process
your application
according to very specific government and industry lending
guidelines, regulations and standards.
In order to
obtain approval for
your loan, you will need to satisfy the qualifying standards
of the particular
program that is involved. Amongst other considerations,
the program that you
apply under will require you to verify your income, and
show that you have the necessary income qualifying ratios,
cash
reserves, credit
scores, and work history.
Due to the many
factors involved, it is easy to miscalculate the amount of the
mortgage that you qualify for. Fortunately,
there is
a simple
solution: obtain a mortgage pre-approval from your
lender. The value of a mortgage pre-approval cannot be over-emphasized.
You are going
to invest a lot of valuable time and emotional energy to locate
your perfect house. You just can't put a dollar
value
on these personal costs which will be lost
if your mortgage application is denied. Avoid the stress
and get your mortgage pre-approved!
In addition
to the personal costs, as soon as you sign your contract, you will
invest several hundred
dollars
for an
application fee with
your intended future lender. Typically, this fee
will cover the cost of your
lender’s appraisal of the home you want to
buy, and also its cost to examine your personal
credit.
You will also
invest
several
hundred
dollars with a home inspection company to ensure
that the property is in the condition you believed
it to be in when
you negotiated
its price.
Your investment in these costs will be totally
lost if your mortgage falls through. See, another great reason
for getting mortgage pre-approval! My intention here
is to help you remove the various obstacles that might prevent
you from getting to own your own home regardless if you are wanting
to be a first time home buyer or have owned homes before.
What about your
deposit? This deposit, represents all
or part of your down payment, which you
will be required to
place in escrow
with the Real Estate Listing Broker or the
Seller’s attorney when you
sign your contract. Escrow is neutral third
party that holds the documents and money for a real
estate transaction and
ensures that all conditions of a sale are met before
any disbursement of funds or articles.
Depending upon
the loan program involved, required down payments
range from 3% to
20% of the sale price, and all
or a portion of this amount will be placed
into escrow when you sign your contract. Although the
terms of your contract should provide that
your deposit will be refunded to you if
your mortgage is denied, situations can and do arise where Sellers
claim the right to retain Buyers’ deposits
even after their mortgages are denied.
Today, many
of the most attractively priced homes are owned or controlled by
financial
institutions
such
as banks.
Many of these banks will
not entertain an offer from a non-cash
Buyer unless the purchaser has a
mortgage pre-approval in
the necessary amount. Even if your
Seller is not a financial institution,
in the case of multiple
offers, offers submitted by Buyers who have been
pre-approved for financing
carry far more
weight
than offers
submitted by Buyers not similarly approved.
The purchase
of a home is the largest and most significant transaction in
most of our
lives.
Please obtain a mortgage
pre-approval. When
you sign your purchase contract, do
so with reasonable certainty that your
mortgage application will be approved.
Avoid the sleepless nights that
go hand-in-hand with mortgage
applications
that are doomed to
fail.
