Get Finances Ready to Buy a House

GET FINANCES READY TO BUY A HOUSE

Even with mortgage rates remarkably low, many would-be buyers fear the challenges of securing a loan in this economic climate.  While it can be more complicated now to finance a home purchase than in the recent past, there is money available.  Here are several ways you can do to acquire a mortgage.

Start early

Deal with the financing before you spend significant time looking at homes.  It's always been a good idea to start the mortgage-approval process prior to submitting an offer on a property, but now the tighter credit markets make it simply essential.  And if you have any credit hiccups or other financial missteps to iron out, the more time you have to resolve the problems the better.  Buyers should get pre-qualified as soon as possible.  That will give you an idea of what to expect in terms of a mortgage.  A pre-qualification doesn't guarantee that you can get such a loan, but it's a good starting place.

Pre-qualified vs. pre-approved

You should get pre-qualified for a loan as soon as possible. 

Pre-qualification will give you an idea of how much money you might qualify to borrow and whether a mortgage is even possible.  You provide a lender with your approximate income, current debts, and any important details from your credit history.  The lender calculates how much money you may be eligible to borrow prior to application for a loan.  All information submitted during pre-qualification is subject to verification at the time the loan application is submitted.  In other words, you aren't guaranteed anything.

Pre-approval, on the other hand, goes further than pre-qualification.  You will fill out a loan application, and after examining your financial situation, the lender will commit in writing to funding a loan.  You are not committed to borrow the money, but getting pre-approved for a mortgage enables you to move quickly when you find the home you want and to, of course, make a more compelling offer to the seller.

 Remember government programs?

The well-publicized end of "exotic" mortgages like Option ARMs doesn't mean that only a select few can get loans.  Plenty of government-backed lending programs exist, and now they might be your best bet.  These programs were designed to help borrowers with less-than-perfect credit or without funds for a 10% down payment.

Your state or local housing authorities can help you search for available homebuyer-assistance programs in the city or county where you are looking at homes.  Many of those programs are specifically designed for first-time buyers.

And, especially important these days, there are federal programs like FHA loans. 

Gather proof

Get ready to document your financial situation for any lending institution.  Gather bank statements, pay stubs, tax returns, other debt statements (e.g., car loans, credit card balances), and any other documents that relate to your finances. 

Who do you know?

The Web may be a great for comparing rates, but sometimes shopping locally is the way to go.  There's usually no substitute for being face-to-face with the person you'll be borrowing through.  Try your own bank, your credit union or a local lending institution before applying online.