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While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not good. Get your yearly FREE credit report and be aware of your existing credit situation. Also, monitor your credit on a regular basis. There are several online companies that you can use, such as My FICO score.com. Then do some research on any potential lenders reputation and track record. Not all lenders can deliver what they promise. Make sure to have all lender inquiries for a prospective home loan done at the same time. Each time an inquiry is done on your credit report, it has the potential to lower your credit score.
One train of thought says that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries, while the other says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. This is a decision only you can make. Are you in a position where you expect to make more money soon or would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it's within your comfort zone. Take into consideration that circumstances could come up that may affect your ability to repay your loan. One good stategy is to set a goal ahead of time to have a specific dollar amount in a savings account earmarked for emergencies.
To determine how much home you can afford, talk to a lender or go online and use a "home affordability" calculator. Good calculators will give you a range of what you may qualify for. Then call a lender. There are many types of loans available and your lender will match you up with the best rate & program for you. Lenders processing fees, down payment requirements, and closing costs vary depending on the loan.
Get pre-qualified so that you are in a better position to make an offer on that perfect home. Depending on the area you live in, homes can sell very quickly and sellers may receive more than one offer at a time. Sellers like to know that a potential buyer has the ability to purchase their home. Make yours stand out by having a pre-qualification letter available at the time the offer is submitted.
There is a difference between being pre-qualified and having loan approval. Pre-qualification is based on the information you have provided regarding income, debt, and your credit report. You will be approved up to a certain amount based on this information provided. This will help your Real Estate Agent tailor the homes that you preview by keeping them within your budget. Loan approval comes after your offer has been accepted and copies sent to your lender. The underwriter will make a final determination based on the appraisal of the home, review of all documentation, and a final credit report. Potential buyers should not take on any additional debt during this time period as it could affect their ability to qualify for final loan approval.
Your professional Real Estate Agent will walk you through all phases of your home purchase, from making the offer to closing on your home. Purchasing a new home can be stressful, but an agent with good negotiating skill and knowledge of the market in the area, can make the end results very rewarding for the buyers.
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