A crucial step before buying a home is to get pre-approved for a mortgage. Being pre-approved makes you a stronger candidate when you find your dream home and are ready to make an offer. At the buyer consultation, we can discuss the types of loans, down payments, and how the pre-approval process works. We always recommend going with a local lender. This enables you to establish a relationship with a local contact, which can be vital as the date of closing draws near and critical tasks must be completed. Conversely, using a lender found on the internet, at best, all you have is an 800 number to call if problems arise.
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Your lender decides what you can borrow, but you decide what you can afford.
Lenders are careful, but they make qualification decisions based on averages and formulas. No one understands the nuances of your lifestyle and spending patterns like you do. So, leave a little room for the unexpected – for all the new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs.
Historically, banks use a ratio called 28/36 to decide how much borrowers could borrow. An approved housing payment couldn’t be more than 28 percent of the buyer’s gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn’t be more than 36 percent. As home prices’ have risen, lenders have responded by stretching these ratios. In considering your loan options, we urge you to give careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.
You can use this mortgage calculator to check estimated mortgage costs for different priced homes.