In many areas around the country, the number of buyers looking for their dream home outnumbers the number of homes for sale. This has made it more important for you to stand out as a buyer. The first step is a mortgage approval.
Even as things slow down over the winter, knowing what you can afford and understanding your budget will help you in your home search.
There are 4 “C”‘s that lenders talk about when talking to clients. The 4 C’s will help you know what you can afford and also what you can be qualified for.
1 – Capacity: This is your current ability to make your payments. Basically this is your current income and what we use to determine what you can afford.
2 – Capital: (another term would be cash reserves). This is the money you have in the bank. It will include money in your investment accounts, retirement and any gift money that you might be able to use in purchasing a home.
3 – Collateral: This is the home that you are going to purchase. An appraisal will be done on it to make sure the value is there for the mortgage you take out.
4- Credit: This is your history of paying your bills and any other debts on time. The better your credit, the easier it can be to get approved – it also helps your interest rate and any possible programs you might be looking at.
Getting pre-approved is the first step to show a home seller that you are serious and will make it easier to get your offer accepted. Many buyers over estimate the down payment required and talking to a lender will make it easier to figure out what you need to do to purchase a home. It will also give you a chance to find out if there is anything you need to fix before you can buy a home! Talk to your loan officer and see what you can be approved for now – then you will know what you can afford and start the house hunting process!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
