Successful Buyer Strategies Part II – How much Can I Afford?

In Successful Buyer Strategies, Part I we suggested that surrounding yourself with a team was the best way to start the adventure leading to the purchase of your home.

Knowing how much you can afford is paramount. The best way to determine your buying power is to check in with a lender and ask to be “pre-approved”. A “pre-approval” will require some time but usually does not cost anything other than the price of a credit report. You will need to provide detailed financial information about your income, expenses, and assets; and you will need to authorize a credit check. If you already know you have a poor credit rating, you probably know it can be more difficult to get approval. You can try and clear up your score the best you can by using the best credit cards to build credit, paying your bills on time and getting anything removed from the credit score if it shouldn’t be there – sometimes there are mistakes! The lender will verify all of this information and, once the file is complete, will issue a letter or certificate of “Pre-approval”.

The first benefit to being pre-approved is knowing with certainty how much you can afford from the outset which helps you streamline your search to houses within your financial reach, allowing you to make comparisons within the same price range. A second benefit to being pre-approved is that you will be in a position to act quickly once you decide on a home to purchase. Third, being pre-approved is a strong, in fact in our area an essential selling point for the offer you structure. A seller will be unwilling to get into contact with someone who may not be financially qualified to purchase their home. When looking for your lender, it’s important to get as much advice as you can to make sure you get the most appropriate mortgage. For example, if you are a medical professional, it’s worth having a look at things like this physician loans review to make sure you have all the information you need before speaking with a lender.

There are three primary types of lenders in the market place:

1. Direct lenders are representatives of financial institutions such as Wells Fargo or Bank of America. They offer the products developed by the institution they represent.

1. A mortgage broker qualifies the borrower, assembles the documentation required, matches the borrower’s needs to the best possible source of funds and submits the package for approval to that bank.

1. A mortgage bank actually underwrites and funds all of it’s own loans. Once the loan is closed they sell the servicing to another bank such as a Wells Fargo or Bank of America or they may sell the loan directly to Fannie Mae or Freddie Mac and retain the servicing.

A mortgage banker or broker can also place loans with “private” investors which are typically needed when the borrower’s needs fall outside of the “traditional” underwriting that is standard with traditional banks.

Finding a reputable lender is a key consideration. When working with our Buyer clients we usually recommend that they interview three different lender sources depending on their financial needs, and we always recommend choosing a local lender who is familiar with local escrow processes and property values. We have had the unfortunate experience of having clients choose national lending sources which lack familiarity with local procedures, and when you are in contract to purchase a house it is never a good idea to run the risk of not being able to close the transaction in a timely manner. Honesty and performance are two essential qualities to look for in a lender. With all these factors taken into consideration, the next stage would be to find a Preston mortgage advisor (or a firm more local to your area) to look at how you should set up your mortgage, as well, paying over a timely manner.

Contact us if you would like to be referred to our trusted loan sources.