Not too many years ago, becoming pre-approved before searching for a home was unimportant. Now, it’s almost mandatory.

That’s because a few years ago almost anyone could get a mortgage loan. Now that the banks have tightened up on their regulations, it isn’t so easy.

In addition, thousands of consumers who had high credit scores lost that status when the credit card companies suddenly slashed credit lines. Since 30% of a credit score is based on how much credit you use compared to how much you have, credit scores plummeted overnight.

Because of these changes, sellers are wary of accepting offers from buyers who don’t have that pre-approval letter in hand. They simply fear taking their homes off the market without some assurance that their buyer will actually be able to perform.

Thus, when two offers come in and one has pre-approval for the mortgage loan, that’s probably going to be the accepted offer.

Pre-approval also gives you as a buyer an advantage. Finding your lender and your loan ahead of time means you can shop for the best loan program and the best interest rates. It also gives you fair notice if you need to be looking for a home that will, for instance, qualify for FHA financing.

In addition, pre-approval lets you know the maximum dollar you can spend on your new home. You probably already know how much you can afford to pay each month, but the loan program and corresponding interest rate will dictate how much you can pay for a home and still stay within that figure. Just 1% can make a big difference.

Knowledge really is power. So make choosing your lender a top priority as you begin your home search.

I’ll help… unless you have someone you’ve used successfully in the past or have a solid referral from someone you trust, give me a call. I’ll be happy to give you a list of mortgage loan officers who have done well by my clients.

If you have questions about the real estate market or purchasing a vacation home in San Digeo please feel free to contact us.

In such a position an option that you may consider is short sale. A short sale is a process in which a homeowner, that is, you will have to come to agreement with a mortgage company that the company will accept less as payment on your mortgage than what you owe. After this they forgive the rest of the amount that you had originally owed on the mortgage. A short sale can be beneficial for both you and the mortgage company. You can get out from under your old house which you can no longer afford and start off new. You don’t have to worry about foreclosure anymore. The mortgage company with which you are signing the deal benefits if your house doesn’t go into foreclosure. This is because, their business is not selling homes and this entails for them a lot of hassle with paperwork and associate costs. On top of that, during the foreclosure, the house is anyway sold at less than what it is worth. Thus for mortgage companies, short sale is more attractive than foreclosure.

However, this does not mean that a short sale is without its drawbacks. Firstly, you won’t be able to sell your new house and buy a new one with the proceeds. You have to find another place to live, either a rental place or with friends and family. Also, with a short sale on your record, your credit will take a plunge. However, in spite of these drawbacks, a short sale is your best possible option.

Planning and budgeting

Planning and budgeting are two of the most important things that you will have to do before buying your home. Planning is important before buying a home; through planning you will be able to decide on the mode of payment that you would like to take upon, the type of home you would like to buy, the place you would like to live in and so on. Budgeting helps you in deciding on the amount that you will be able to afford in order to buy a home.

So, you will have to budget in order to find out your affordability. If you do all of these from the beginning, you will both be able to make the right planning and save money as you will be required to make the down payment even if you take out a mortgage to finance your home.

Furthermore, if you plan from ahead, it will also help you in deciding on the right kind of mortgage that you can take out to finance your home. You will get the time to do research on the types of mortgage and as to which one will be the best as per your affordability.

Importance of mortgage calculator

The mortgage calculator is one such financial tool that helps you in finding out “how much house can I afford”; in furthering your decision as to which mortgage will be the best for you. For example, after shopping for mortgage loans, you will be able to get the details on the costs of each mortgage if you use a mortgage calculator. Thus, it will help you decide on the right kind of mortgage for yourself. Other than getting the idea on the total costs, you will also be able to know the details of the payments like how many payments you will have to make, within which time you will be able to totally pay off the home loan amount along with the interest, how much amount you will be required to pay against the interest rate and so on.

There are even mortgage calculators which will help you in better understanding of the amortization process, as to how the money you are paying lowers the debt amount and how the amount gets divided into payment towards the principal and towards the interest.

Importance of debt to income ratio

Other than the above, another very important thing that you will be required to consider before taking out your home mortgage is the debt to income ratio. It is the ratio of your income and the amount that you pay towards your debts each month. It is a measure in percentage and the higher the debt to income ratio or DTI, the higher is the amount that you will be required to pay against a mortgage. So, it is important for you to check with your DTI much before applying for a mortgage so that you are able to lower the debt amounts and thus the DTI ratio too. This will help you in getting better offers which will have low interest rates.

Thus, you can see that there are in fact various things that are to be considered before buying a home and before taking out a mortgage for the same. Thus, it is important for you to plan much ahead of time so that everything goes smoothly and so that you do not fail on the home loan payments and lose your dream home.