Step 1: Get Pre-Approved

Lending standards and programs change daily. It is critical to establish as early as possible what you can comfortably afford when purchasing a home. Aim to spend no more than 25-33% of your monthly earnings on a mortgage payment.

Compare at least 2 lenders when shopping for a mortgage. Get referrals from friends and your Realtor. Pick up the phone and give them a call or fill out their online mortgage application online if they have one. If you belong to a credit union give them a call as well, as they may have special deals for their customers.

Other important things to consider when getting your pre-approval:

· Down Payment: The larger your down payment the better. Conventional loans usually require 10-20% down where an FHA loan requires as little as 3.5% down, and if you qualify for a VA loan you may not need a down payment.

· Closing Cost: What is your lender charging you? What are the government fees in the county you are purchasing in? Ask any lender you apply with for a “Good Faith Estimate” that outlines your cost. Plan on spending an additional 2-3% on closing cost on top of the sale price.

· Annual Property Taxes: Check your county’s public records online for tax rates and assessments, but taxes vary and cost about 1% of the assessed value.

· Homeowners Insurance: $50-100 a month covers the home and its belongings.

· HOA/Condo Association Fees: These fees vary and can be found in our search.

What you need when applying:

· Pay stubs and W2s (lenders are looking for income verification for two years)

· Two or three months of bank statements

· Self Employed applicants must provide 2 years of Tax Returns

The pre-approval process is painless and usually takes no more than 24 hours. Make sure to get a pre-approval letter from the lender so you are ready when it is time to make an offer.

Here are some helpful online tools that can help:

· Affordability Calculator (http://articles.moneycentral.msn.com/Banking/Loan/HomeAffordabilityCalculator.aspx)

· Mortgage Calculator (http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx)

· FHA Mortgage Calculator (http://www.fha.com/calculator_payments.cfm)

· Today’s Rates and Trends (http://www.zillow.com/mortgage/#{scid=mor-site-topnavmor})

· Free Annual Credit Report (https://www.annualcreditreport.com/cra/index.jsp)

 

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