Many buyers apply for a loan and obtain approval before they find the home they want to buy. Why?
Pre-qualifying will help you in the following ways:
1. Generally, interest rates are locked in for a set period of time. You will know in advance exactly what your payments will be on offers you choose to make.
2. You won’t waste time considering homes you cannot afford.
Pre-approval will help you in the following ways:
1. A seller may choose to make concessions if they know that your financing is secured. You are like a cash buyer, and this may make your offer more competitive.
2. You can select the best loan package without being under pressure.
How much can you afford?
There are three key factors to consider:
1. Down Payment
2. Mortgage Qualifying
3. Closing Costs
Down Payment Requirements
Most loans today requir a down payment between 3.5% and 5% depending on the type and terms of the loan. If you are able to come up witha 20-25% down payment, you may be eligible to take advantage of special fast-track programs and possibly eliminate mortgage insurance.
You will be required to pay fees for loan processing and other closing costs. These fees must be paid in full at the final settlement, unless you are able to include them in your financing. Typically, total closing costs will range between 1% and 3% of your mortgage loan.