How to Pre Qualify Before Buying a Home

When deciding to buy a home, many people make the mistake of rushing out to look at homes they like. This can lead to heartbreak, when they find out they either can't afford the payment, or can't get that amount financed. Prequalifying for your financing gives you the security of knowing what price range to look in, and that once you've found the house the loan is already secured. This gives you "power" when negotiating with the owners.

Instructions

Do Your Research

1. Write down a list of all of your monthly expenses. This should include regular monthly bills, groceries, gas and any other work and or school expenses you normally have. Don't forget to add in yearly expenses such as insurance, license plates, and real estate taxes, if you already own a home. Divide these by 12 and add them to your monthly expenses.

2. Figure up your monthly income from all sources. This should be the net income that you actually receive, not the gross. Deduct your expenses from your income to access how much of a house payment you can afford. Do not over-budget yourself!If you have a pre-existing house payment, use that amount and figure the total purchase cost from that.

3. Search Google for an online mortgage calculator. Many bank sites have them available on their home page, and it's not necessary to be a customer, or to have to log in. You can also purchase a amortization book from a local bookstore. They are not expensive and will save you time and money in the long run. It will explain just how to calculate your payments according to interest rates and years to pay-off.

4. By determining the amount of a monthly payment you can afford to make, you will also determine the overall price of the house you can afford. Now that you know the most you can afford to pay for a home, it's time to contact your bank, or lending institution.Have all of your figures written out in front of you when you call.

Talk to the Mortgage Loan Officer

1. Call the bank where you have an account and ask to speak to a mortgage specialist. Don't ask what they can do for you; be specific about what you want. For example: Tell the mortgage specialist that you want to qualify for a home loan, and state the terms that you want.

2. State to the mortgage specialist that you have already calculated the purchase price and the monthly payment you are able to handle. Tell the mortgage specialist that you want to prequalify for that lump sum amount, with that specific payment amount. Tell the specialist that you also would like the current fixed rate locked in as soon as you qualify.

3. Pre-qualifying is as simple as the mortgage specialist running your credit report and checking your status at their banking facility. The mortgage specialist will usually have an answer for you within a couple of days. Then you will know what prices of houses to target to look at.

4. Filling out tons of mortgage paperwork starts as soon as the mortgage specialist confirms by phone that you qualify for the amount you requested. They may even tell you that you qualify for more, depending on your income. Tell them you are not interested in a larger amount, no matter how enticing it sounds.

5. Ask the mortgage specialist to issue a letter of qualification to you and to send a copy to the realtor you are working with. Homeowners are much more willing to negotiate with someone they know already has a loan, as opposed to having to wait to see if the buyer can get a loan.