Thousands of people every year enter the real estate market to purchase a residential home. First time homebuyers to experienced investors all have one thing in common; they all get pre-approved from their mortgage lender prior to making an offer on a property they want to buy.
The pre-approval consists of a potential homeowner (aka “borrower”) supplying personal information about themselves and their financial situation. The borrower then supplies the necessary documentation for the loan officer to review.
If the borrower is approved the loan officer issues a letter that states the borrower is “pre-approved” for a specific purchase price and loan amount. The borrower can then use that letter with the offer they submit on the home they want to purchase.
The Biggest Market In The Country:
The biggest real estate market in country is California. From homes that cost less than $100,000 to homes that cost more than $10,000,000, California is a unique place to purchase a home. If you do not know a good loan officer, then you’ll want to find a mortgage professional with tons of experience. Don’t use someone who just got hired or someone that has poor reviews online.
Work with someone who is a good communicator and who gets back to you in a timely manner. A professional who offers solutions and is willing to take the time to find the right loan program that will match your financial needs.
How Much Can You Afford?
So you have your loan officer in place; what’s next? A little bit of work. You’ll need to determine how much you can afford and this is where your mortgage professional is going to be a true asset. If you are an experienced homeowner you probably already know the steps you need to take to figure out what you can afford.
If you are new to real estate or need a refresher here it is: A great way to start is to ask yourself if your current rent (or if you own right now your mortgage payment) is something you are comfortable with and how much more do you think you could afford.
So if your rent is $1,500 per month and you feel like you could afford a $2,000 house payment then tell your loan officer what you feel comfortable with. Keep in mind that the $2,000 includes the mortgage payment, property taxes, property insurance and if the property has one the monthly HOA fee. Then determine how much of a down payment you have for the purchase.
Your loan officer will then determine what purchase price and loan amount that will result in a monthly payment of $2,000 per month. You then can adjust as needed.
Make The Offer:
With your mortgage pre-approval letter in hand you are ready to go out and find a home. Like your loan officer make sure you find a great Realtor, one that knows the local market inside and out. If you are a first time home buyer; try to get a Realtor that specializes in helping those that are first time home buyers.
Always make sure you’re staying within the amounts your loan officer has approved you for (which is listed on the pre-approval letter). But let’s say you come across your dream home and the Realtor tells you it’s $30,000 above your budget and the sellers are not willing to budge on the price. Reach out to your loan officer, see if there are some other options to consider like a different loan program.