Use the tools on the Tellus Real Estate Solutions website Once you’ve narrowed down the location and property type, you’ll want to start thinking about your limits with regard to your loan amount, down payment and estimated monthly payments. Use the Mortgage Calculator tool on the Tellus Real Estate Solutions website to estimate payments for the most common loan types.
Begin checking with lenders for the latest interest rates Check with lenders for the latest interest rates for the type of loan you are considering. You will also want to verify what the requirements are for your credit score, the amount of down payment needed, income requirements, etc. Be sure to check with several lenders, as no one lender has the best rates for all loan types and borrowers.
Check your credit score It’s a good idea to check your credit score before starting the process of securing a loan. This way you can take care of any inaccuracies right away, or have time to clean up your credit if you’ve had some problems in recent history. The website www.annualcreditreport.com is the government mandated site for requesting a free copy of your credit report from the credit reporting agencies.
Create a budget Don’t just settle with the amount of loan, down payment or estimated monthly payments that the lender says you can afford. Think about your budget. Better yet, create a budget. Decide what kind of payment you are actually comfortable with paying. Download the Tellus Real Estate Solutions Home Buyer Budget spreadsheet to get started.
Obtain a pre-approval from your lender At the end of this process, you will want to obtain a pre-approval from the lender with whom you decide to work. Make sure the lender provides a pre-approval, not a pre-qualification. The former requires they run a credit check and has more validity than the latter, which is based only on your statements to the loan officer. With a pre-approval you will be able to provide specifics with regard to your home buying requirements including:
- The amount of down payment you are able to afford
- The amount of closing costs you are able to afford
- Monthly payments you are able to afford, which will include principal, interest, property taxes, home-owners insurance and any other fees such as Home Owners Association (HOA) dues
- The total loan amount for which you qualify
- The type of loan
Items included in a pre-approval will educate you or your real estate agent on the total price you are able to pay for a property from a lender perspective (down payment + loan amount), how much you are able to afford based on money needed for closing (down payment + closing costs) and the location and type of property based on loan type. As an example of the latter, FHA loans require homes to meet specific standards. Condominiums must have a special approval. USDA zero-down loans only apply in certain areas. Fixer-uppers likely require rehab loans.