Know Your Buying Power first
In Many local and national real estate markets, There are more home-buyers looking for their dream home then there are available homes for sale. When this happens, the market place is very competitive and buyers need to make sure they stand out to a potential seller. One way to show a seller you are a serious buyer is to get pre-approved for your loan upfront so a seller knows you are a qualified purchaser.
even in non-competitive markets, it makes good sense to know your buying power before searching homes to be sure your dream home is within your reach.
Freddie Mac points out the advantages of pre-approval in the "My Home" section on their website. "It's highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets."
One of the many advantages of hiring a local real estate professional to assist you in your purchase is that most agents have working relationships with lending professionals who will guide you thru the mortgage process. Getting pre-approved is quick! You will need to provide the lending professional with important information about your credit, your debt, work history, down payment amount and residential history.
Freddie Mac describes the "4 C's" that help determine the amount you will be qualified to borrow:
- Capacity - Your current and future ability to make your payments
- Capital or cash reserves: the money, savings, and investments you have that can be sold quickly for cash.
- Collateral - The home, condo or type of property you would like to purchase
- Credit - your history of paying bills and other debts on time
Having your pre-approval in hand is just one of many steps that will show a home seller you are serious about buying their home. If often speeds up the contract process once your offer has been accepted by the seller.
Many prospective home-buyers overestimate the down payment and credit scores necessary to qualify for a mortgage. You may be pleasantly surprised based on your financial position, how much home you can actually afford!
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