How Much Real Estate Can You Afford?
Banks and lenders use specific criteria to determine how much of a mortgage they’re willing to offer you. They look at your income, the income of the property, expenses, credit history and employment status, as well as the down payment you plan to make on a property. It may seem like a scary process, but it is actually straightforward. You can usually get a Mortgage Pre-Approval in a few days. You’ll be glad that you did.
By knowing what you can afford, you can confidently shop within that price range. For example, if you qualify for a $550,000 mortgage, and you have another $55,000 available as a down payment, you can look for homes in the $605,000 range.
Start with a Mortgage Pre-Approval, then get a Mortgage Commitment
An important ingredient in a successful property search is knowing how much you can afford. You don’t want to fall in love with a property only to find out it’s outside your price range.
That’s why I recommend starting the process with a Mortgage Pre-Approval and then securing a Mortgage Commitment when you’ve decided on a lender and ready to commit to purchasing a property. The Mortgage Pre-Approval is a document from your bank or other lender stating how much of a mortgage they are willing to give you based on an application. A Mortgage Commitment is offered after the lender has vetted your financial situation and confirmed all your application information. The only outstanding details to finalize relate to the actual property your interested in.
There are some advantages to being in this situation:
- It gives you the peace-of-mind of knowing you can afford properties you view on the market, and won’t have problems arranging financing.
- It’s a sign to sellers that you are a serious, prepared buyer – which gives you the edge when making an offer.
- Some lenders may give you a rate lock so you don’t have to worry about rising interest rates while you look for a new home.
- There’s no cost to you and you’re not obligated to accept the mortgage.
You can arrange for a Mortgage Pre-Approval with your bank or other lender, or by working with a good mortgage broker. I’m well-connected in the local real estate scene, so if you want me to recommend a reputable broker or lender, please contact me.
Have questions about arranging financing? Please submit the form below or call or email me.