April 18, 2019
Q: My current house just isn’t doing it for my family. We’re looking for a house to purchase that is near good schools and in a good neighborhood, but it’s taking longer than hoped. I’m a little worried that interest rates are going to go back up before I get a chance to buy. What should I do?
-Hopefully Homeward Bound
A: We don’t get much practice in thinking about the cost of homes throughout our day-to-day lives. You probably know how much you could reasonably spend on a night out or a spontaneous vacation. Some quick back-of-napkin type of calculations can give you a reasonable budget for most everyday expenses. But when it comes to home prices, they aren’t in the same category. Visualize $200,000. Now visualize $450,000. Chances are good your visualization didn’t change very much.
These differences are conceivable when they get down to the monthly payment. A $200,000 mortgage might mean a $950 monthly payment. The $450,000 mortgage, on the other hand, would mean nearly $2,000 in monthly payments. That’s a difference you can visualize!
Getting help with making those numbers real is just one of the many reasons your first step in the home buying process should be mortgage pre-qualification. Before you start looking for houses, contact an agent or pack a single box, sit down with one of our CUMA (Credit Union Mortgage Association) mortgage consultants. To get started with the pre-approval process visit https://www.interiorfcu.org/loans/mortgages/ .
Here are three other reasons why your first call should be to a mortgage specialist.
1.) A mortgage consultant can help you set your budget
Flipping through the real estate section of the newspaper can produce two negative consequences. First, you might panic about the price of real estate in your area. Seeing home prices significantly higher than you expected can lead to sticker shock. You might immediately scale back what you think you can afford. Flash forward two months after you’ve settled for something less sizable because you thought it was more “affordable” and you may realize the 400-square-foot studio you’re sharing with your partner and two children is feeling cramped.
The other side of flipping through those ads is the likelihood of falling in love with a house you really can’t afford. You might find the perfect place with a beautifully manicured lawn, a spacious living room, professional-quality kitchen and hardwood floors. You begin to daydream about what life would be like living in this place. Then you consult a mortgage professional and learn this dream house is way out of your price range.
You can avoid both of these scenarios by speaking to a lender first. Based on your credit history, your income and several other factors, you’ll get an upper limit for your future mortgage. This will give you an idea of how much house you can afford and make sure you match your budget with a house that will fit your needs.
2.) Pre-qualification gives you leverage with a seller
If you’ve ever sold a house, you know it’s an endless struggle of work. There are always a million things that need to be done, and there’s never enough time to do them all. People actively engaged in selling their homes don’t have time to fool around with people who are not totally serious about getting into a new home.
Getting pre-qualified for a mortgage shows that you’re serious. Not only does it demonstrate your intention to buy a house, but it also shows buyers that you can afford the offer you’re making. In fact, most buyers will not accept offers that don’t come with a home loan pre-qualification.
A preapproval letter is the key to showing agents and sellers you’re worth the effort. It shows them you’ve got your ducks in a row and you’re ready to make a deal. Speaking to a mortgage expert will get you through the door with many of the professionals you need to deal with in order to buy a house.
A strong undying passion for one’s dream is the greatest helping hand one could ever ask for.
3.) Pre-qualification can find little problems before they get big
The formula for home loan approval is incredibly complicated. While your salary and your credit score are central to determining how much house you can afford, there are a ton of other factors going into the decision. For example, your mortgage approval could be affected by a recent job change or an unpaid medical bill. The pre-qualification process finds these snags.
After sitting down with a mortgage professional, you’ll have a better idea of what factors are limiting your home buying budget. If you haven’t had your current job very long, it may make sense to wait a few months before buying to get approved for a larger loan. If there are errors or inaccuracies on your credit score, the pre-qualification process will bring those to light.
By putting financing at the beginning of your home buying journey, you can ensure you have the time to resolve these problems. Since the only people involved in the conversation are you and your mortgage expert, there’s no risk of embarrassment. If you wait until you’re in talks with a seller before noticing these problems, you risk having your offer rejected by a nervous seller or agent.
At some point, you’re going to need to get approved for a mortgage. There’s no reason to wait until after you’ve picked out your dream home. If you wait, you may be setting yourself up for heartbreak and regret if you fall in love with a home you can’t afford. Conversely, you may settle for less house than you want because you didn’t know your price range. Avoid both these nightmares by speaking with a mortgage professional today!
RELATED: Apply for a Home Loan with us Today!
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