Posted on: 24 April 2019Share
Buying a house in today's market is an exciting prospect that is also an important one. The home and neighborhood you choose to buy in and the interest rate you borrow the money at can all have an effect on your life after the home purchase. When you are ready to begin this process and have a real estate broker by your side to help you, here are some questions you need to ask yourself to make sure you have all your finances ready.
Do You Know Your Purchase Limit?
When you are ready to buy something, you usually want to make sure you have enough money to do so. This is no different when you buy a home. The best place to start the process to determine your spending limit is by talking to a mortgage lender. They will have you complete a credit application to list your income, then calculate a maximum loan amount based on your information.
The amount you are pre-approved for with your mortgage is a maximum. So keep in mind you can always look for a home well under the limit, which will reduce your mortgage payment. But, if you find the home of your dreams that is the full amount of your preapproval amount, your mortgage broker can provide you with a pre-qualification letter, which verifies and strengthens your position to buy the home.
How Much Cash Can You Put Down?
The limit of your home financing budget is important, but you should also consider how much available cash you have to put toward your home purchase. When you find a home you want to buy, it is helpful to have earnest money to accompany your offer. This money shows the seller your interest in securing the property and is put into escrow and toward the home's purchase price.
You will also want to have some funds available which you can put as a down payment when you get your financing for the home. A bank will look more favorably on the lending situation when you have the cash you are going to put toward the purchase instead of borrowing all the money. You will also likely need some cash to pay for closing costs at your closing meeting, which can be several thousand dollars, depending on the home's purchase price.
Be sure you have these funds available to deliver via cashier's check or a wire transfer to your title company on closing day. However, you can still buy a home without having a large down payment. Talk to your mortgage broker and your real estate agent about techniques and purchase options to accomplish this.
As you consider these questions, your realtor can help you get going on the home-buying process