Home buying is not as easy as you think. It's not as easy as having money and buying the house outright. This is an expensive purchase. It involves hundreds of thousands of dollars. Most people do not even have this kind of money. So even if they think they have much, it may not be enough to cover the whole purchase price of the house. On top of that, there's commitment. Once you buy a house, you would enter a contract. Once you sign it, there's no backing out unless the seller fails to meet the contingencies of sale. So buying a house is no joke. If you make this purchase and you do not have enough funds, you cannot simply tell the seller I do not have enough money. Or else, you will breach the contract and you can be sued.
So when you buy a house, you really have to be hundred percent prepared. Most likely you would end up borrowing money. There could be plenty of lenders that are willing to accept you as their client. However, there are many considerations in getting mortgage. You have to make sure you can afford it. This is because when you pay this back, it will not only cover principal (or the amount the lender allows you to borrow). You will also have to pay back interest, taxes and insurance.
Hence, buying a house involves tons of expenses. It is important that you open your eyes to these. With these expenses, you need to ascertain if your income could accommodate the additional expenditure. If you are not certain, you need to make a budget.
In making a budget, you would have to take into account all your income sources (both regular and seasonal). You also have take into account a list of your common expenses. From your net income, you can already tell if you can afford to get mortgage or if you will have enough money to get the house you want. You also have to take into account your savings. So that you know how much margin you have in case, you get a little overboard.
But to have a more accurate budget and to get a clear picture on what you will be paying in home buying, you may have to visit your lenders. This is an important step to do in buying a house, especially if you're not purchasing in cash. But do not worry; doing this does not tie you immediately to one lender. If you plan to shop around, talking to them about your plans on getting mortgage and getting an idea how much you can borrow is good basis for making a budget. This process is then what they call getting pre-qualified.
Pre-qualification is an informal way of knowing if you qualify for a loan. Just like making a budget, the lender would take into account your income and expenses. After which they will perform an evaluation to determine if you qualify for a loan or not. They will also give you an idea how much your mortgage is and you can discuss with them the possible ways to payback what you owe. You will also learn more about the interest, the taxes and the insurance involved. They will also discuss with you the other expenses that could be involved in application process. Getting pre-qualified gives you more or less a good estimation of the total money you need to raise for buying a house.
If you want to be pre-qualified, you can visit mortgage websites and use the online calculator. You can also speak with a representative from the bank and get evaluated over the phone. Just make sure you provide them with accurate information so that you can get a more realistic amount that you can use as a basis for making the budget.
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