The Pre-Approved Stage
This is considered the "Pre-Approved" stage. The best way to find out this information is to contact a local lender. We have worked with a number of local lenders whom we can recommend for you to contact. By knowing your financial options ahead of time we are able to focus on the homes that meet your financial requirements. A strong pre-approval will increase your buying position and negotiating strength.
It is often thought that bigger is better when it comes to down payments. In many cases, this may be true. However, the arithmetic will differ from case to case. A bigger down payment means smaller monthly payments and lower interest expense for as long as you have a mortgage. This can be an important factor for many people. But if you can put your available funds to work for you so that they can earn more than the interest rate on your loan, you could be dollars ahead with a smaller down payment. Also, a smaller down payment may allow you to keep you extra cash liquid and available for other purchase decisions or any possible emergencies that might arise.
Down Payment Requirements
The amount you have available for a down payment will affect what types of loans for which you can qualify. Down payments typically range from 3% to 20% of the sales price for the property. If you are able to come up with 20-25% down payment, you may be eligible to take advantage of special fast-track programs, better interest rates and eliminate mortgage insurance.
Can you qualify for a mortgage?
Your lender will use a credit report to start their analysis for loan pre-qualification. In today's increasingly automated society, it should come as no surprise that when you apply for a mortgage, your ability to pay can be reduced to a single number. All the years you've been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations. This report is a history of debt repayment, total outstanding debt and total available credit.
If you have concerns about your credit report, consider contacting one of the major credit bureaus for a copy of your file:
- TRW (1-800-422-4879)
- Trans Union (1-602-933-1200)
- CSC Credit (1-800-759-5979).
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate. It is always a good idea to keep yourself updated with your scores. Most lenders require that your monthly payment range between 25-28% of your gross monthly income. Your mortgage payment to the lender includes four items: the PITI, "Predicting Your Monthly Payment". Your total monthly PITI and all debts (from installments to revolving charge accounts) should range between 33-38% of your gross monthly income. This is a general rule of thumb, but other key factors specifically determine your ability for a home loan. Your income, employment history, stability of income, potential for future earning, education, vocational training and background, and any secondary income such as bonuses, commissions, assets, cash on hand and child support are also some items that are taken into consideration when your applying for a loan.