Pre-approval letters do expire. Be sure to keep your letter current and updated throughout your home search.
Getting pre-qualified may sound official; it is really just getting an idea of what you can afford. Its having a person plug in a few numbers that you give them – your monthly income and your monthly debt – and getting an approximate payment calculated.
Pre-qualifed letters state only from the payment, that that calculator can approximate the house price range that you can afford base on the not verified information provided.
When obtaining a pre-qualification letter no information is verified. Because your assets, income or credit is not verified, a pre-qualification has little value when purchasing a home.
Pay attention to both your interest rate and your lenders fees. Compair both on your pre-approval letter when choosing between lenders.
If you’re like most buyers, a home is the most expensive purchase you’ll ever make, and you’ll probably need some form of financing.
There are many lending institutions that offer a variety of mortgage products.
Financing options and rates can vary widely, so it is important to do your research and shop around to ensure you get the mortgage that best meets your needs at the best price.
We would be happy to refer you to one of Southeastern Michigan’s highest regarded mortgage lenders & the lender within that firm that brings more buyers to the closing table.
Your financial health – your credit and home affordability.
Is now the right time financially for you to buy a home?
Would you rate your financial picture as healthy?
Is your credit good?
While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not good.
Generally, a couple of blemishes on a credit report will make you a good credit risk and could qualify you for the lowest interest rates.
If you have more than a couple of blemishes on your report, lenders like Quicken Loans may still provide you with a loan, but you may just have to pay a higher interest rate and fees.
Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries.
The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow.
This is a decision only you can make. Are you in a position where you expect to make more money soon?
Would you rather be conservative and fairly certain that you can make your payment without stretching financially?
Make sure that whatever you do, it’s within your comfort zone.
To determine how much home you can afford, talk to a lender or go online and use a “home affordability” calculator.
Good calculators will give you a range of what you may qualify for.
Then call a lender. While some may say that the “28/36” rule applies, in today’s home mortgage market, lenders are making loans customized to a particular person’s situation.
The “28/36” rule means that your monthly housing costs can’t exceed 28 percent of your income and your total debt load can’t exceed 36 percent of your total monthly income.
Depending on your assets, credit history, job potential and other factors, lenders can push the ratios up to 40-60% or higher.
While we’re not advocating you purchase a home utilizing the higher ratios, its important for you to know your options.
Where the money for the transaction will come from?
Typically homebuyers will need some money for a down payment and closing costs.
However, with today’s broad range of loan options, having a lot of money saved for a down payment is not always necessary – if you can prove that you are a good financial risk to a lender.
If your credit isn’t stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender.
The ongoing costs of home ownership.
Maintenance, improvements, taxes and insurance are all costs that are added to a monthly house payment.
If you buy a condominium, townhouse or in certain communities, a monthly homeowner’s association fee might be required.
If these additional costs are a concern, you can make choices to lower or avoid these fees.
Be sure to make your realtor and your lender aware of your desire to limit these costs.
If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.