Mortgage Pre-Qualification and Pre-Approval
Why Pre-Qualify before looking for a home?
1. You will know before you start looking what you can expect your interest rate to be. (Remember interest rates do fluctuate and being Pre-Qualified does not lock in your rate.)
2. You won’t find a home you love only to find out you can't afford it. We won't waste time considering homes you cannot afford and save you the disappointment and heartbreak.
Pre-Approval will helps you by:
1. Sellers may choose to be more negotiatble if they know your financing is secured. You are essentially a cash buyer and your offer is more competitive.
2. You have time to shop loan packages to determine your best fit.
How much home can you afford?
Three factors to consider:
1. The down payment
2. Your Credit History and Debt to Income Ratio
3. The closing costs associated with your transaction
Down Payment Requirements:
Most loans today require a down payment of between 3.5% and 5.0% depending on the type and the terms of the loan. If you are able to come up with a 20-25% down payment, you maybe eligible to take advantage of special fast track programs and possibly eliminate mortgage insurance.
VA loans are also available for those who are eligible. The loans requirement no down payment, but a funding fee is required.
You will be required to pay fees for loan processing and other closing costs. These fees must be paid in full at time of settlement, unless you are able to include them in your financing. Typically, closing costs range between 2-5% of your mortgage loan. Many times in Sumter, a buyer can negotiate for the seller to pay a portion if not all of the buyers' closing costs.
Qualifying For The Mortgage:
Most lenders require that your monthly payment range between 25-28% of your gross monthly income. Your mortgage payment to the lender includes the following items:
· The principal on the loan (P)
· The interest on the loan (I)
· Property taxes (T)
· The homeowner’s (hazard) insurance (I)
Your monthly PITI and all debts (from installments to revolving charge accounts) should range between 33-38% of your gross monthly income. These key factors determine your ability to secure a home loan: Credit Report, Assets, Income and Property Value.