Before you begin shopping for that new home there are a few more important steps to take care of. There is no point in looking at $700,000 homes if you can only afford $400,000. Looking over your financial situation and talking to a professional lender are essential before you start the hunt.
Build your financial file
The first step is to get all of your financial information together. This will ‘paint the picture’ for a lender as to exactly how much you can afford and what types of loans you can qualify for. Some important items include:
Getting this information in order at the beginning of the process will save you both time and frustration down the road. An additional step we always recommend is to pull your credit score from all 3 credit bureaus for free. This way you can make sure there aren’t any false claims or inconsistencies that might affect your financing. You’d be shocked to know how many errors there are on a lot of buyers’ credit reports that they were unaware of. A few minutes of homework can save you thousands down the line.
Get your finances in order
Home ownership is a big responsibility and you need to make sure you are ready to make the plunge. Sit down and be honest with yourself about your monthly income, debt and other financial responsibilities. As the saying goes, you don’t want to be house rich and cash poor, meaning you may not want to sacrifice other aspects of your life to buy a home. We certainly don’t want you eating Spaghettios for dinner every night or not being able to go to the movies because your mortgage payment is too high.
The best way to go about this is to figure out how much you want to pay per month and still live the lifestyle you are used to. This number can then be used to determine the price point at which you are comfortable purchasing a home. Sometimes banks are able to lend more than you are comfortable paying on a monthly basis and that’s all right. It is much better to know now what you can afford to budget each month for your mortgage rather than finding your dream home and realizing that buying it would put you in a dangerous or stressful position. Everyone’s situation is different so take the time now to do your homework, be honest and figure out exactly where your priorities are.
Speak with a professional lender
Once you have gathered all of your financial information and determined what you can pay monthly it is time to speak with a lender to see exactly how much you can afford. There are tons of great loan products in the market right now ranging from conventional loans, to low down payment loans and even 100% financing loans. Take a look at our mortgage section to see a brief overview of some of the basic loan types.
We always advise speaking with a professional lender as products and loan criteria change on an almost daily basis. If you don’t already have a trusted lender then feel free to contact us and we can suggest some professionals that we work with on a daily basis. They can provide you with a free pre-approval that will show exactly how much home you can afford. Once you have this information you are ready to being searching for your new home with the guidance of an experienced Realtor.