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| *Loan,banking and credit>>>mortgage loan |
Can I get a loan for a home/ mortgage payment before I pick a specific home? |
I am interested in purchasing a home and have a price range in mind. Can I get a loan for a home in my price range before I choose a specific house?? Hello Kathy, Yes, I would absolutely get the pre-approval done before you find a home. First of all, many home sellers or their trusted agents typically give first dibs to those that seem serious (i.e. people with financial backing). Also, this is a great time to go over your credit situation and find out if owning a home makes financial sense for you. As you well know, our country and the industry is seeing some of the highest foreclosure numbers we have seen in many years. A large reason for this is because many home buyers do not truely understand all of the expenses that are part of owning a home (upkeep, property taxes,HOA or homeowner's insurance, etc.). Bottomline, use the mortgage pre-approval process to evaluate your own situaton and really spend the time to determine if this is the right move. If after going over these factors you still feel comfortable with the transaction, definitely shop around and always ask the finance company for a Good Faith Estimate. The GFE (as commonly callled) is an ESTIMATE breakdown of the loan program. Nothing here is written in stone but at least you have something in writing to shop with. Shop at least 3 different lenders before moving forward. Also, many on-line sites are NOT banks and are lead generating companies that will make sure your information gets sold to as many different companies as possible ensuring you annoying phone calls for months after you had completed your transaction, be very careful. Buying and owning a home can be great and actually be a benefit financial but you have to make sure you are prepared for what you are walking into. Good luck and please feel free to ask additional questions. Source(s): I have been a mortage broker for nearly 10-years doing business in all 50-states. Most banks will Prue-approve you for a loan specifying the amount. They won't give you the money up-front. A mortgage is tied to land and the house on the land as collateral. If you don't have that land and house, they aren't going to give you money. I did...i knew how much i could borrow from the loan, based on my pay etc and looked at houses on this price range. Yes, in fact it is better to get preapproved for a mortgage before going house hunting. You then tell the real estate person you work with that you are preapproved to buy a house up to a certain amount and they won't be trying to show you homes you can't afford. It makes the buying process faster and gives you an advantage over other buyers who aren't preapproved as you may get a house that others want just because your loan can get through faster. You dont get the loan, but you get preapproved-- they see your checking account statements, your paycheck stubs, your credit...everything they need, and they give you a maximum price to shop in....then you pick the house, get a purchase and sale agreement, and you fax that over to the bank that preapproved you, and they start actually writing the loan. Just before closing day, you go sign the loan papers for the house, and on closing day the house is yours. Of course you can! In fact, it's the best way to go about it so that you know what range you are looking in. For most people, buying is more expensive than renting. However, the tax deductibility of your mortgage expense makes owning a home a bit more practical. Uncle Sam helps make about a third of your mortgage payment through tax deductibility. Once you have made the leap and decided that you are going to buy a home, it's time to find out what you can afford. This is where we can help you. Unless you fit into one of the "special categories" of loans鈥擵A, or First Time homebuyer鈥攜ou are going to get a "conventional loan." The remainder of this pertains to "conventional loans." The purchase price that you will be able to afford depends on 3 main factors: Your income and how much other debt you have. This will determine how large a payment you can afford. How much you have for a down payment and for closing costs. Your credit history. Loan Jargon The following three terms will help you better understand the rest of this scenario: Loan-to-Value (or LTV) This is the loan amount as a percentage of the purchase price or appraised value (whichever is less). If you are buying a $150,000 home with $15,000 down payment you have a 90% LTV. Loans over 80% LTV require either PMI (Private Mortgage Insurance) or a combination of a 1st and 2nd mortgage which avoids the PMI. Housing Ratio This is your total monthly housing expense (principal, interest, tax, insurance, and PMI and homeowners dues (condos if applicable) divided by your gross monthly income. Note "gross" income is "before" deductions. If you have a "W2" job your income is easy to determine. If you are self employed, please note your gross income is what you bring from your Schedule C onto line 12 of your 1040. Also, a 2 year history of consistent self-employment income is generally necessary. Debt Ratio This is your total monthly ousing expense plus your monthly payments of your installment and revolving debt. Some details here: this would include child support, alimony or separation maintenance. Any debt with fewer than 10 months to go does not count. A debt such as a "buy furniture now, make no payments until more than a year from now" does not count as long as there are 12 months to go without payments. The same applies for student loans. Your income and credit will determine the sizeof the loan you can qualify for. You will need cash for 3 things: The "Down Payment" Closing Costs This is where many people get off track. You need to cover your one time or "non-recurring" closing costs, your "recurring" closing costs: prepaid interest, insurance, impounds if there is PMI and potential prorated property tax. Reserves You need more than $10.00 left in the bank after you purchase. We need to see 2 months (PITI) of your total monthly housing expenses in reserve. You will want to be sure that you get together all of the cash necessary to close. Once we have determined what size loan you will be able to qualify for and where the money is coming from we can determine how expensive a home you can afford. |
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