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The Mortgage Process

The Importance of Pre-Approval

When you have made the decision to buy a new home, getting pre-approved is an important first step. Your Realtor will want to know you are a serious buyer before they even take you out to look at homes and in the event you find one you like, a pre-approval letter needs to accompany any offer. Knowing your price range means you won’t be wasting time considering homes you can’t afford and it enables you to select the best loan package for your needs without pressure.

Qualifying for a Mortgage

Your credit and credit scores have a significant impact on your mortgage interest rate and the fees you pay. To improve your credit and your chances of getting a better mortgage, get current on your payments and stay current. About 35% of your credit score are based on whether or not you pay your bills on time while 30% are based on how much debt you owe.

Most lenders require that your monthly house payment (to include your mortgage, property taxes and insurance) should not exceed 25 – 28% of your gross monthly income. Add that amount to your existing obligations eg, credit cards, car loans, childcare and your total debt should be in the range of 33-38% of gross monthly income.

Closing Costs

Closing Costs can vary depending on where you are buying, the type of home you are purchasing and the mortgage you are using. Typically they range from 1 – 2% of the purchase price and are made up of one off costs which you only pay when you purchase a home (such as title insurance and transfer taxes) and pre-paid escrow funding (like home owners hazard insurance and property taxes). You can negotiate for your seller to pay a contribution towards your closing costs as part of the purchase agreement.