Mortgage Pre-Approval
There are many reasons it’s a good idea to get a mortgage pre-approval but among them are:
1. It gives you a leg up on other buyers when you do finally find a home you like. Sellers are more likely to take offers from someone with a cash offer or a pre-approved mortgage amount as they want to be more certain that the deal won’t fall through.
2. You can narrow down your search once you know what you can afford.
Lenders will look at your entire financial situation. You will need to show proof of income and they will review your credit record. You can buy a home less than your pre-approved amount but think of your pre-approval amount as a ceiling. If the lender tells you, you can afford an amount but your personal budget doesn’t allow it you’re best to stick with your budget as you know what you can handle better than anyone.
Knowing your credit score is important before you apply for a mortgage. Your credit score is one of the most important pieces of information a lender considers when deciding on your interest rate.
You will need to be sure that everything on your credit report is correct. Mistakes can hurt your credit score. It could increase your interest rate and your monthly payment.
The credit bureaus gather information on your payment history.
They compile information on the debt you carry, your current and past addresses and your history of liens and bankruptcies.
Lenders generally use your credit score as your credit worthiness.
If you have a low credit score you may want to hold off for a couple of months to save up more money, pay off some debt and try and bring your payments up to date.
The next important thing to do is work out a budget.
1. You need to know and be honest with yourself in how much you can actually afford to pay towards a mortgage each month.
2. You need to add up all of your monthly expenses and be sure not to forget the little things such as weekly dry cleaning, as they all add up.
3. You also will need to add in things like house insurance and mortgage insurance.
4. Also leave some money each month for regular house repairs and home improvement projects.
5. You need to also leave room in your budget for moving expenses and for things such as appliances, more furniture etc if you are moving from renting to owning for the first time.
Once you have your budget you will be able to determine how much you can afford to spend on a house taking into consideration your down payment amount.
To really know what you can afford though you need to be pre-approved by a lender.
Don’t go house hunting, guessing what you can own.
