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Buying: Know How Much You Can Afford

Determining the sales price that you can afford before we actually start the process of finding your new home allows us to narrow the search. This enables us to focus on the right list and select areas that may afford you stronger buying power on the size of home that you desire.

You must get pre-qualified and where possible, get pre-approved. This gives us a fast and easy price determination once when we begin to write an offer on a home of your choice. It can mean the difference between success and failure. Most sellers demand written proof of the buyer's ability to purchase the house before they will even consider an offer.

Because you will have already completed the steps necessary to get pre-qualified, you will have the added benefit of understanding the costs associated with purchasing your home. Not all costs are directly connected to your mortgage. However, these costs will still affect your cash-on-hand reserves.

What is the difference between pre-qualified and pre-approved?

Pre-qualifed means that based on the initial information that the potential borrower provides, it appears that the buyer can qualify for the loan amount the lender specifies. Pre-approval means that based on the more specific information requested by the lender from the borrower, including the cost, condition and age of the specific house as well as additional financial information from the buyer, the buyer would be approved for a loan to purchase that home. The real difference is how much underwriting and documentation that is required by the lender and provided by you.. The level of commitment from the lender is critical and is based upon the documentation and credit history you provide as well as the house information required by the lender..

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Pre-qualified - you work with a mortgage specialist and fill out simple forms, provide documentation on how much you earn, how much you owe on a monthly basis and also how much money you can put down. All information is handled in strict confidence. The result are options with estimates of the highest price that you can afford with the various terms and conditions of the loans. Furthermore, complete documentation or more in-depth research may indicate that you qualify for an even higher loan amount than you thought.

Pre-approval – is similar to pre-qualification, but much more in-depth, you fill out complete information with documentation. Research is done so that all issues are resolved prior to approval on your home loan. Your lender handles all documentation and all information is held in strict confidence. The result is as good as cash and provides the highest level of negotiation leverage besides an actual cash offer.

However, in both cases the final loan is dependent upon everything remaining stable throughout the process up to and including the day of closing, so major purchases must be avoided. Employment is verified, so this is not the time to change jobs. Large cash transfers out of your bank accounts or other major asset changes will directly affect your final closing approva and/or terms.