In today's real estate market having an
advantage over the competition can make a big difference.
When your competition is other home
buyers, a key advantage is being able to demonstrate to a seller
that you are at least pre-qualified, if not pre-approved for a home
loan.
The Basis of Pre-qualification
Lenders look at two figures to determine
your pre-qualification amount:
Front
Ratio: The percentage of your gross monthly income (i.e. before
social security, taxes, etc. are deducted)
This will go towards monthly housing costs. (mortgage payments,
property taxes and insurance, often referred to as PITI).
The precise ratio that a lender will use varies from region to region
and from
one loan program to another, but usually falls between 28% and 36%.
Back
Ratio: The percentage of your gross monthly income (i.e. car
and student loans, required credit card payments, alimony, etc.).
This
will be used to pay your combined monthly housing costs and regular
monthly payments.
Again,
the precise ratio will vary from one lender to another, but typically
lies between 32% and 45%.
What is Pre-Qualification
Before searching for a new
home, it is important to determine how much one can afford.
Being pre-qualified before
looking for a home can save time, energy and frustration.
Diversified Capital offers laptop loan pre-qualification for its
clients.
With state-of-the-art
portable computer systems, we can easily compare loan options,
review credit reports and estimate closing costs.
With a variety of
loan programs available, it's important that we help our clients determine
what types they qualify for and which loans best suit their needs.
Pre-Approval
Loan Pre-Approval is distinctly
different and takes a pre-qualification one step further.
A pre-approval means your application
has actually been submitted to a lender and underwritten.
The approval is generally subject to the
purchase contract, appraisal, title report and any other items the
underwriter may request.
Being able to demonstrate to a seller
that your loan is pre-approved can be a great advantage when
negotiating the purchase contract.
In fact, the majority of our clients are
getting pre-approved before they start shopping for their dream home.
If you would like more information about
pre-qualification and pre-approval, ask your mortgage loan specialist.
