Most Americans live on a budget. When they go into a grocery store, they know how much money the can spend. They may have to choose between hamburger and steak, but they use their money wisely.
Shopping for a home is different. How much home you can afford depends on the mortgage you can receive. You may think your budget will allow you to purchase a $200,000 home. However you may discover that you don’t qualify for an Arizona home mortgage because of previous credit problems. Finding your dream home then learning you do not qualify for a mortgage can be devastating. But you if pre qualify for a mortgage, you can shop with a home with your “budget” in mind.
The Pre Qualification Process in 4 Easy Steps
1. Find a lender. When the housing market was booming, many so called mortgage companies opened. Unfortunately, many of these companies were led by mortgage loan officers who had never been in the mortgage industry. Many of those companies are out of business today. When looking for a lender, remember “CENTS.” You want a lender who is
• Competent
• Experienced
• Knowledgeable
• Trustworthy
• and that can Save you money.
2. Gather all of your financial documents. You will need several items including paycheck stubs, income tax returns, proof of other debts (car loans, credit cards, etc…) and proof of any other income.
3. If you don’t have a written budget, make one. Make sure you include ALL of your expenses. Anticipate possible medical expenses and vacations. If you miss your mortgage payments, you could end up in foreclosure. Proper planning will keep you safe from unexpected financial disasters.
4. Meet with your mortgage broker to discuss your options. Once he or she has all of your information, you will be able to find out if you pre qualify and for how much.
Are You Credit Worthy?
Pre qualification is determined by two factors:
• Do you have the ability to repay the loan?
• Does your previous credit history indicate that you are willing to repay the loan?
You can prove that you are able to repay the loan by having a low debt to income ratio. Lenders also consider your employment history. You have a better chance of getting a loan if you have been at the same job for the past two years.
Several factors will determine if a mortgage company will find you willing to repay your loan but two are particularly important:
• Have you paid all of your previous financial commitments? This will be reflected on your credit score.
• Will you be living in your home, is it an investment or is it a second home?
Once you have pre qualified, you can begin looking for homes in your price range. Your mortgage loan officer may be able to provide a document that you can take to your Realtor to show you are pre qualified. Realtors love to deal with buyers that have met with a mortgage officer before searching for a home because deals can be closed quicker.
Author Resource:
Chriss Carr is the Vice-President of CFS-Mortgage. Founded in 1982, Phoenix-based CFS Mortgage Corporation is a closely-held mortgage banking firm licensed by the state of Arizona. http://www.cfs-mortgage.com
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