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Home Buying Tips: Pre-Qualifying Your Mortgage and Making Your Budget

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By : Rose B    99 or more times read
Home buying is an endeavor that ultimately requires handsome financing. But not all buyers are equipped with ample cash on hand all the time. On the other hand, other buyers can take on alternative mechanisms to get proper financing. If you are one of the latter type of buyers, pre-qualifying your mortgage and consequently preparing your budget would be the best measures you can take for you to successfully go through the home purchase transaction.

Tip 1: Ensure your financial standing is at its best condition. Prior to going through any real estate transaction, your ultimate weapon to impressing lenders is to present them with your good financial standing. Most lenders give special regard to good credit score. If your score is lower than the national average 675, you might need to pay higher interest rates, provide further documentation or the worst, not find a lender at all. You should also be mindful to keep track of your debt payments and income. All the documents reflecting your financial activities should also be prepared so as you can avoid redundant requests of accomplishing such papers from your lender.

Tip 2: Understand the pre-qualification process and its benefits. Generally, the lender would evaluate your credit history and ask for your basic financial information such as current debts, income and assets. These details can maneuver the type of loan your lender would consider matching your financial capabilities and needs. During this stage, it is important that you and your lender carefully discuss your mortgage options.

This proves can make your home buying endeavor a lot less straining. Firstly, you can establish the terms of mortgage you can afford. Upon knowing the details of your mortgage payment obligations, you can then streamline your selection of houses according to their prices vis--vis your budget. It would then be easier for you not to put down an offer in houses way out of your affordability. Thus, financial disasters in the future may be prevented.

Tip 3: Make the pre-qualification letter work for your advantage. In one point of this process, you will have to acquire the pre-qualification letter from your lender. This will serve as a reference document for sellers and other lenders. Although this document will not be the decisive factor for your loan or purchase offer to be approved, it can still be an essential aspect for your bid to be considered. For one, you would be interpreted as a serious buyer once you present the pre-qualification letter to the seller. The letter itself can be a means to translate your being mindful of your financial obligations upon consulting a lender prior to putting down an offer.

Tip 4: Utilize the result of pre-qualifying your mortgage in preparing for further costs attached to buying a home. As the pre-qualifying process gives you an overview of your probable mortgage payment terms, you can then be more prepared on how to properly allocate the rest of your budget. Among the initial expenses you have to expect during the purchase process are the down payment and closing costs. It usually takes at most a 20% down payment to avoid acquiring private mortgage insurance. Documentation, professional and services fees and charges are usually disclosed by your lender prior to closing the deal so as you can prepare the ample amount.

These simple tips can surely go a long way in preparing your finances for purchasing a home. Taking note of the particularities of pre-qualifying your mortgage can definitely make way for a less stressful and profitable home buying endeavor.
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