Buying a home in today’s marketplace can be a bit intimidating.  And your new home purchase is likely to be one of the most important decisions you will ever have to make.  Moreover, it’s also one of the single most valuable assets you’ll ever own.

Before you invest hundreds of hours searching, and to avoid any heartbreak if you find yourself unable to qualify, sit down with a lender first.  Your lender can perform a simple verbal pre-qualification in about twenty minutes and a full-fledged pre-approval in a few days.

Pre-qualification not only allows you to focus your search in the correct price range, saving a lot of wasted time and frustration, but it can also give you and edge when competing with other offers on a home that you may find.  If a seller is deciding between two offers, yours, who has been qualified, and another unqualified offer, they are much more likely to pick yours.  Pre-qualification will also give you leverage when negotiating with a seller in a non-competitive atmosphere; it essentially makes you a cash buyer.

The amount of home that you qualify for will be determined by two key factors: your down payment, and your ability to qualify for a mortgage.

Whereas a current homeowner can rely on equity from the sale of a home, a first-time homebuyer is limited to the money they can save.  The days of having to put 20 percent down on a home are in the past, although putting a large amount of money down definitely makes it easier to qualify for a mortgage and also helps to get the lowest interest rates available.  With various purchase programs that are available today, you are able to qualify for up to 100 percent financing.

There are two basic guidelines that lenders use to determine what size mortgage you are eligible for:

1. Your monthly mortgage payment of principal, interest, taxes, and insurance (PITI) should as a rule of thumb not exceed 28 percent of your monthly gross income.
2. Your monthly housing cost (PITI) plus other long term debt generally not exceed 40 percent of your monthly gross income.

Specifically, most lenders will consider 4 key factors to determine your ability to qualify for a home loan:

Income – This first element can include not only gross monthly income and secondary income (commissions, bonuses), but also your history of employment, stability of income, education, even potential for future earnings.

Credit History- This encompasses your history of debt repayment, total outstanding debt, highest balance, and your highest monthly debt balance.

Assets – Your assets consist of cash on hand, savings and checking accounts, CDs, stocks, bonds, brokerage accounts, or any other type of liquid asset.

Property- The home you are planning to purchase will be appraised to determine the market value.  The estimated value must be sufficient to secure the loan.  Lenders will generally loan you no more than a certain percentage.

For more information contact us at Texas Loan Star, Inc at 713-802-0606, your resource for commercial and residential real estate financing.