The Commonwealth Blog

Wednesday, October 2, 2019

Financing Your Home

Most people don’t purchase a home with extra cash they have lying around. Instead, they rely on loans to make their mortgage payments—this is especially true for first-time buyers. In order to qualify for a loan, you’ll need to let lenders review your financial history so they can make sure you’ll pay off your mortgage.

Lenders will check your credit score to determine the amount of money they’re willing to loan you. After you know your loan amount, you’ll have a better idea of how much money you can put toward your down payment, which in turn gives you a realistic idea of what homes are in your price range. 

Qualifying for a Home Loan or Loan Preapproval

Approach your house hunt with a good sense of your own purchasing power. After all, you don’t want to tour a home you can’t afford. Before setting foot onto a property, make sure you possess the financial backing needed to submit an offer. Opt for mortgage prequalification or loan preapproval to get an idea of your ideal price range.

  • Mortgage Prequalification: During the prequalification phase, a lender will evaluate your financial trustworthiness (your creditworthiness) to determine if you’re eligible for a loan. Prequalifications are an approximation based on the financial information you provide—they don’t guarantee you’ll receive a loan. Prequalifications are best used during the window shopping phase, before you’ve decided you’ll purchase a home in the immediate future.
  • Loan Preapproval: During this phase of the home buying process, lenders investigate your financial history to offer a specific loan amount. To determine a loan number, lenders will ask for your income, credit score, credit history, and the amount of money you have in savings. This process gives you a realistic idea of the homes you can afford within a specific price range. 

Rely on a Loan Officer for Help

No matter your financial state, a loan officer is there to assist you. If you’re not in the best financial position to purchase a home, your loan officer can recommend ways to improve your credit score and trustworthiness. Alternatively, if you’ve got the go-ahead, a loan officer can prepare you for purchase by letting you know which loan programs you qualify for, what your purchase price limit is, what your monthly payment might look like, and how much money you need for your down payment, closing costs, and reserves.

Don’t Skip These Important Steps

Don’t jump into the game without the skills you need to win! Before you get too excited about a potential new home, first go through your finances to see what you can realistically afford. This allows you to put your best foot forward while placing an offer on your dream home.

 


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