2017complete3

account at least two to three months before you will be paying a deposit on
a house or closing.
Get pre-approved
As soon as you’ve decided you are interested in purchasing a home, sit down
with a mortgage professional to discuss how much credit you can expect to
receive. This initial discussion can lead to one of two outcomes: prequalification
or preapproval. Although often used interchangeably, the terms do in
fact carry different meanings.
Prequalification is a non-binding assessment of the buyer’s credit, income,
and assets which allows the mortgage broker to provide an estimate of the
loan amount the buyer will qualify for. Based on the buyer’s self-reported information,
a prequalification is neither checked for accuracy nor guaranteed.
A preapproval, on the other hand, usually entails actually pulling the buyer’s
credit and examining all the pertinent documentation. Valid for a limited time
period (typically 120 days), the preapproval letter confirms how much credit
the buyer will qualify for, and at what interest rate. Getting pre-approved signals
to sellers and real estate agents that you are really prepared to buy, and
greatly reduces your risk of failing to qualify for a mortgage. Some agents
won’t even show you houses or make offers on your behalf without a preapproval
in hand. Pre-approval can also save precious time down the line,
when you are trying to qualify for a mortgage under a tight deadline.
How much house can you afford?
Calculating how much you can afford to spend on a house, and how much
credit you can expect to be approved for, is a complicated equation with numerous
factors coming into play. While expert advice is best obtained from a
mortgage professional, it is helpful to understand a number of basic concepts.
Banks typically determine your loan size based on your debt to income ratio
(DTI); they will not allow your monthly payment to be more than a certain
percentage, often 36%, of your income. So if you already have student loans
or car financing, you will generally not be able to receive as large a mortgage.
DTI limits can vary significantly between different lenders.
Also, the higher your credit score, the lower the interest rate you will be able
to secure.
In Lakewood, many people rely on rentable apartments to help meet their
mortgage payments. However, this income will rarely count on your loan
2017 Lakewood Home Buyer’s Guide | 49