Thinking of buying a home? Now’s a great time! Especially as interest rates continue to rise, the sooner you get locked in on a mortgage rate, the better. Here in the Atlanta area, the number of buyers searching for their dream home far exceeds the number of homes for sale. When this happen, the marketplace becomes very competitive. Simple supply and demand fundamentals, really. Which is why one way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
I talk with folks all the time who are ready to buy, and my first question is always “have you been pre-approved or pre-qualified for a loan?” I’m always surprised at how many haven’t been. This is always step one in the home buying process, especially for first time home buyers. Getting pre-approved or pre-qualified does two things:
- Let’s us know how much home we should be searching for. I always tell people, we all have diamond taste but most of us live on cubic zirconia budget, right?
- Most importantly when it comes time to make an offer on your dream home, having your financing together, hopefully, moves you to the top of the list for the sellers.
We have great relationships with our lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information a lot of times about your history regarding credit, debt, work history and that sort of thing.
In a nutshell, here’s what determines the amount you will be able to borrow, according to Freddie Mac. It’s known as the ‘4 Cs’:
- Capacity: Your current and future ability to make your payments
- Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
Bottom Line? Many potential homebuyers overestimate how much they’ll need for a down payment and they think their credit score may not be good enough. Working with a lender, you may be surprised at what your numbers really are.