If you are interested in buying a home in 2013, there are several things you need to be doing right now in order to make the process as smooth as possible. First and foremost, if you haven’t already started, you need to be saving money and paying down as much debt as possible. These two factors will help contribute to your debt to income ratio that mortgage lenders look at before approving you for a loan. If your situation is not exactly where you want it to be, you don’t have to panic, but you should be consciously making an effort to improve it with every day that passes.
The next thing you need to do is to take a close look at your current financial position to establish what kind of mortgage you think you can afford. If you already own a home, you will need to decide if you are going to stay within your current budget, downsize to something more affordable, or bump up a few price brackets. The easiest way to do this is to play around with an online mortgage calculator that can provide a rough monthly estimate based on mortgage loan amount, taxes, insurance, interest, realtor percentages and home value. Keep in mind the more money you have for a down payment, the less you have to borrow. This can result in making shorter term mortgages and other non-traditional mortgage products more affordable for some people.
Once you have a direction in mind, your next step is to contact a mortgage broker to get pre-qualified or pre-approved for a home loan. This step is important because it shows potential sellers and agents that you are a legitimate prospect. Pre-approval is different from pre-qualifying in that the qualification process is basically a preliminary estimate of what the mortgage company is willing to loan you. Your qualifying ratio is then used to determine which kind of loan product is best for you, since different kinds of loans come with different qualification requirements. To get pre-approved for a home loan, the lender will need to verify your credit and review your personal financial information in order to offer you a firm estimate of a specific loan amount. Information you will need to provide in order to get pre-approved include: two years of W2’s and Federal tax returns, current paycheck stubs, your most recent bank statements and a complete employment history. It is important to note that even if you are pre-approved, the final loan amount will be determined based on information for each particular property. This means that most mortgage companies will not loan more than a property is valued.
It does not matter if you are searching for Boulder homes, Texas property, or Boise real estate; the pre-approval process is absolutely crucial. By planning well, you can avoid big financial mistakes and lessen the potential of your transaction falling through due to bank noncompliance. If you are thinking about buying a new home, ask your agent or lender about getting pre-approved to get the ball rolling.