Once you’ve made the decision to buy a home, you’ll likely want to jump in and start touring homes. But, far too many prospective homeowners begin the process this way and set themselves up for disappointment. How? By looking at homes that they are not qualified to buy! Imagine falling in love with your dream home only to find out that you can’t afford it. So, before you step foot in any home, you should be pre-qualified with an experienced lender.
Choosing A Lender
Your real estate agent can likely refer you to several lenders with whom they have worked. However, you are always free to choose any lender. Be sure your lender is experienced. Ask questions like: How many years have they been in business? How many years with their current company? What is the average days from application to closing? Is the processing and underwriting done locally or does the Loan Officer have to connect with folks in another time zone? Ask for references.
Although credit is an important factor in buying a home, it is one of several components that the lender will review. First, your credit will need to be pulled and your score will help determine which loan programs you qualify for. In some cases, your lender may even be able to offer suggestions on how you can improve your score to qualify for better programs.
Your debt-to-income ratio is just that. A lender will review the amount of debt you have. This typically includes car payments, revolving/credit card accounts, student loans and similar types of debt. Then, your lender will evaluate your income. This could include your job, alimony or child support. A ratio will be calculated and this too, will help determine which loan programs you may qualify for. Your lender should also advise you to freeze any large expenses so that your ‘financial picture’ doesn’t change during your home search.
Cash On Hand
You are likely going to need money for the down payment on the home, so a lender will want to see that you have saved this money and that it is in your bank account. Although gifts are sometimes allowable, the source of any gift funds must be clearly documented so be sure to ask your lender before depositing any large sums into your account.
Your lender and real estate agent will work hand-in-hand to help guide you through the home buying process. Be sure you are working with a lender and agent that have experience and take a solutions-oriented proactive approach when challenges arise. These are your best advocates! To schedule a consultation or pre-qualification appointment, contact us today!