Prequalification Approval |
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| The first thing you need to consider when buying a home is how much you can afford or are willing spend. Start with your gross monthly income, and then tally up your monthly debt load: credit cards, car loans, personal debt, child support, alimony, etc. For revolving debt use you minimum monthly payment for the calculation. For the purposes of this calculation, ignore any debts you expect to have paid off entirely within six months time. As a rule, your monthly housings costs shouldn’t exceed 36% of it. With that said, these days lenders might tailor the 28/36 ratio, depending on your situation. When calculating your budget, don’t forget to factor in closing costs, which include insurance, appraisals, attorney’s fee, Lenders suggest that you “pre-qualify” or, better still, get “pre approved” for a load. Pre-Qualification is, in essence, an educated guess as to what you’ll be able to afford for a loan. To be pre-approved, you loan officer will review your financial situation and then you will be given a letter documenting that the bank is willing to lend you a particular amount based on your proven financial situation. Pre-approval is a bit more labor-intensive for you and the lender, but sellers and real estate agents will take you more seriously if you show up with a pre-approval letter in hand.
A credit report will list your credit activity for the past seven years, including your highest balance, current balance, and promptness or tardiness of payments. After seven years, the slate is wiped clean for any credit transgressions, except in the case of bankruptcy and foreclosure, which will appear on your record for 10 years. If you find your credit score is not as good as it could be, keep in mind that lenders are more concerned with your most recent track record, than how things looked seven years ago. It’s best to try to pay all your bills in full and on time for a least a year before you apply for a loan, and be ware that even if you pay your bills on time, having too much credit can be a problem. Even if your credit report isn’t stellar, you—most likely—can still get a loan, though your rates may be higher. A substantial down payment can counteract credit flaws as well. The major credit bureaus are:
It’s best to get a copy of your credit report form each bureau, as each report may be different. Your credit report will have a FICO (Fair Isaac and Company). Typically, lenders will give a standard loan for scores of 650+; if your score is lower, you’ll probably get a sub-prime loan (from a non major lender and with a higher inertest rate). If you discover any inaccuracies on your credit report, you should contact the service immediately and request that it be corrected. By law, credit bureaus must respond to your request within 30 days. If you have questions about your credit record, call a credit counseling service before you apply for a mortgage. Be aware that too many credit record inquiries can lower your credit status.
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transfer taxes, and loan few. Fees normally range form 3% to 7% of the purchase price. Likewise, when figuring out your budget, be sure to factor in the additional monthly outgoes of homeowner’s insurance, property taxes, utilities, condo fees, improvements, and maintenance.
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