When looking to make a purchase in the property market it is important not to overstretch yourself. It doesn’t matter if you are a first-time buyer or an experienced property owner, you should only take on financing that you can afford.
There are ways to make sure you don’t put yourself into a situation where you are struggling and here you can read some of them.
First steps in buying an affordable home
You might think that looking for houses or condos is the first step in buying a home but there are other things you can do first to prepare yourself better.
Use an online calculator
Almost all lenders have a website and there is usually a mortgage calculator you can use there. It is a simple tool that lets you input your salary and gives you an estimate of what you can borrow over a set period at a set percentage. It should give you various quotes listed next to different sized deposits. This is a very basic way of seeing how much you can afford to borrow.
Talking to a lender
Getting an online quote is ok but it isn’t in any way binding and may not accurately reflect the amount you can borrow. Understanding all the home loan types and mortgages is difficult so speaking to a professional is a must.
By meeting with a lender you may end up being given a preapproval letter. This is very useful as you can show it to sellers and real estate brokers to prove what you can genuinely afford.
Things you will need before you speak to a lender
When you go to a lender they will need to see certain things from you. This will depend on what country you are in but for the States, you would need your Social Security Number and State ID such as a driver’s license or passport.
You will need to prove your income. How much you can afford depends on your salary and Richard Morrison Vancouver Homes can show you what is a good salary for that area. This will involve pay slips, W2 statements, bank statements, and tax returns along with proof of any additional income you have.
Your lender will want to verify you are employed and your salary is in fact correct. They will often telephone or write so you will need the employer’s contact details to pass on to them.
Getting the best rates
One thing about mortgages is that it isn’t just about finding out how much you can afford but you also want to be able to get the lowest interest rates. A good broker can search through hundreds of lenders and options to find you the right deal but one way you can help yourself is by having a good credit score.
Before you speak to a lender get a free report from all of the credit agencies and see if there is anything you can fix. You can take these to your lender and ask his advice on how to improve things also this is important if you are looking for prequalification.
What is the difference between preapproval and prequalification?
When you speak to a lender they may look through your financial and employment details and work out an amount they believe you can borrow. This is prequalification. The way the two phrases vary is due to credit and other checks.
In prequalification, they will not look at your credit so if you hide anything your quote may be meaningless. Pre approval means the agent has looked at all your details plus your credit report and pre approved you for an amount based on an estimated interest rate.
By talking to a lender and getting a pre approved letter you know where you are looking now on the market. If you jumped into house hunting immediately you may have found a home you loved but then realized you couldn’t afford it. This gives you a realistic target.
Things to ask your mortgage lender
When you speak to a lender about how much you can afford you need to know a few other things too. Make sure you ask what types of mortgages are available. You also need to know which ones are the most suitable for you.
Ask about hidden fees, sometimes lenders charge for making online payments. Find out about the interest rates and APR. One other thing you will want to be aware of is the timescale for processing your loan. Sellers often look for buyers who can move fast so they can move along the chain quicker.
So finding out how much house you can afford is normally as simple as speaking to a mortgage lender. Make sure you have all your documentation, a good credit score, and a reasonable deposit and you will have a better chance of a good rate also.