In various markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-approved for a mortgage before starting your search.
Even if you are in a market that is not as competitive, knowing your budget will assure you of knowing if your dream home is within your reach. Pre-approval will show the home seller that you are serious about buying, and tell you how much home you can afford which will speed up the process.
One of the many benefits of working with a local real estate professional is that most have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding your credit, debt, work history, down payment and residential history. Below are a few terms that will be helpful for you to know:
Capacity: Your current and future ability to make your payments
- Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
- Capacity: Your current and future ability to make your payments
Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage. If you are ready and eager to buy, you may be pleasantly surprised at your ability to do so.