Many home buyers are searching for their dream homes. When the holidays are over, these home buyers’ home search will once again ramp up their effort.
In a competitive marketplace such as ours here in Southern California where buyers often need to stand out, one major way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Competition aside, understanding your budget will give you the confidence of knowing your goal of the dream home is at the end of the tunnel. This understanding will show you the light at the end of the tunnel.
Here’s what Freddie Mac has to say about this…
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the countless advantages of working with a local real estate professional such as myself is that we have relationships with lenders who will be able to help you with this process. Getting good references can save you time but also formulate a “team” for your purchasing process.
The process will include gathering your credit history, debt, work history, savings, and your residential history.
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
- 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
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps from delaying the process once your offer has been accepted.
Keep in mind, as a potential home buyer, we often see an overestimation of your qualification needed to secure a mortgage. So get informed, you might find that you are more qualified than you thought.