Janis Peterson, GRI, ABR, CSP Realtor®
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Qualifying for Loan - How Do You Know You'll Measure Up?
You're ready to become a homeowner. So how do you know you'll measure up?
To answer the question, take a personal fiscal assessment. A solid look at your finances, specifically how much you currently owe, how much you have available for a down payment, and the approximate amount of your estimated monthly mortgage payments, will help you determine the kind of loan you'll be able to procure.
An up-front assessment will give you an opportunity to eliminate potential snags that might occur in the borrowing process.
The best step a would-be buyer can take before beginning the loan application process is to get finances in ship-shape order. You can make sure your current credit standing is good by reviewing a personal credit report from a credit bureau. Inspect it carefully. If there are any errors at all, have them corrected. Lenders will be looking for late payments, bankruptcies, and unpaid collections.
Next, take a look at your current debt load. Lenders will take into consideration how much debt you already have to determine how much they'll loan. Generally, loans are based on the borrower's debt-to-income ratio. This typically ranges from 27 to 29% of gross monthly income compared to a 36% gross monthly income pay out for all debts.
If you currently are paying off considerable debts such as credit card balances, cars,
college loans, etc., this may lower the amount of loan for which you'll qualify. Try to pay off as many loans ahead of time as possible to increase your mortgage borrowing power.
Prospective buyers who want outside help in determining their borrowing status can contact a financial counselor or mortgage lender. If you would like a suggestion for a lender your agent can put you in contact with one. These experts will help you determine the amount of mortgage loan you can qualify for and what home price range you can afford.
Once the amount is established, you'll want to look at the four basic types of mortgage options. These include: 30-year fixed-rate mortgages, 15-year fixed-rate, adjustable-rate mortgages (ARMS), and hybrid loans, which are a combination of fixed and adjustable.
To find out about these various home loan options in detail, you can talk with your real estate agent or broker or lending agent, read real estate books, attend home-buying and mortgage seminars or even surf the Internet. (Affiliates can insert their web site address.)
You may also want to pre-qualify for a loan. Pre-approval takes the uncertainty out of house-buying. Through this process, the lending institution establishes exactly how much you can borrow. Paperwork for the loan is submitted, followed by a credit check, evaluation and verification of your creditworthiness, and finally, a loan agreement. As a buyer you will not be committed to make the home purchase for which you have pre-qualified, but you will have established your creditworthiness.
Sellers are more likely to look favorably on a potential buyer who has pre-approval. And it can mean an advantage in getting the house you want over someone else, result in a quicker transaction, and can possibly mean saving money on the price of the home.
"Real Service in Real Estate." For a personal consultation on buying or selling real estate, Janis Peterson, GRI, ABR, CSP Realtor® can be reached at (610) 642-3744, e-mail: firstname.lastname@example.org. Prudential Fox & Roach Realtors® is an independently owned and operated member of The Prudential Real Estate Affiliates, Inc.
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