1. Determine your Buying Power – Speak to a mortgage lender to determine a loan that fits your needs. Knowing a little about your loan options before you do this can make the process much less stressful. Think about the loan term you would like, 30 yr or 15 yr? A 30 year loan is easier to pay off financially because your loan payments are less, but remember a 15 year loan, which will cost more monthly now, can actually mean you pay half of what it would cost with a 30 yr. Further, think about how much of a down payment you would like and how long you will be planning on living in the home. Most importantly, make sure when calculating your costs to include insurance, taxes, maintenance costs, and association fees. Doing so will give you a realistic price of the home you can afford.
2. Go Shopping….for a loan – It is extremely important to take care of all financial data before even looking at a home. Do this by speaking with your Bank, a mortgage broker, or an online broker. Banks can be great to use, especially if you have credit history with them. The process can be simple, but banks tend to have more “rules” when lending out their money. Mortgage brokers shop around for the best loan according to your needs and can save you money. Online lenders can qualify you quickly, but tend to not be the best option for a new home loan. The process might be cheap, but it can cause many headaches on the way to closing. Most importantly, don’t let interests rates be the driving force to your final decision. Consider closing costs, APR, possible penalties, additional lender fees, and Points. A great interest rate doesn’t mean much when you have to pay thousands up front to obtain the loan.
3. Get Pre-Approved – In today’s real estate world, just being Pre-Qualified is not enough. Home owners are demanding buyers take the loan process further by getting pre-approved. Lenders actually look at proof of employment, assets, liabilities, loans, tax returns etc, and determine the available loan amount from the information. This valuable process can be the difference between your offer getting accepted over another.
Before You Start Looking For Your New Home:
- Check your credit rating. Straighten out any errors before its too late.
- Find a loan program that meets your needs and get pre-qualified (preferably pre-approved).
- Choose a REALTOR® that you trust and who understands your needs.
- Determine what neighborhood best matches your needs.
- Identify important features you need your new home to have.
- Find out how much your closing costs could be.