What Buyers Need to Know About Financing Your Florida Home
Your home will likely be the largest purchase you ever make. With that in mind, it is important to research all financing options carefully so you can make a good long term decision. Take the time talking to multiple lenders to select the best option for you, so your home financing decision will benefit you for your years to come.
How Much Can You Spend on a Home?
A mortgage loan is a big decision for many reasons. Your mortgage will likely be the largest bill you have each month and while it is essential for the mortgage lender to agree to the amount of your mortgage, it is equally important for you to feel that your mortgage payment fits into your household budget. If you default on your mortgage, your home will be taken from you by the lender. Remember that, and don’t get caught up if the lender says you can afford more than you are comfortable with. This isn’t free money. You will be paying it back with interest every month for up to 30 years. Other expenses, such as insurance and taxes, will also be included in your mortgage so if you stretch your home budget beyond your means, this could become a significant burden to you.
Talk with your lender and get their advice but then look at your budget and make sure you feel like that amount is manageable with your other monthly obligations.
Applying for a Home Loan
You have chosen a lender and now it is time to get approved for your mortgage. Don’t wait until you select a house to start the mortgage process. Some houses go quickly and having a pre-approval letter ready to accompany your offer will make your offer stronger when the seller receives it.
During the application process, your mortgage lender will review your credit report as well as your income, assets, and debt to determine how much money you are able to borrow. Knowing this information will allow you to search for a home that meets your needs and fits within your budget.
Mortgage Pre-Qualification vs. Mortgage Pre-Approval
Many people think pre-qualification and pre-approval letters are the same thing, but this isn’t the case. With a pre-approval the lender has completed more of the process to evaluate your financial situation than with a pre-qualification letter. When you are making an offer on a home, a pre-approval letter will carry more weight than a pre-qualification letter. This can give you an advantage when negotiating, or just help the seller know you are serious, since you have already done much of the legwork to secure a mortgage.
You're Under Contract! What Should You Do Now?
Assuming you were pre-approved by your lender before you made an offer on a home, now is the time your lender will complete the underwriting of your loan. You will need to provide documentation to your lender so they can confirm your income, assets and debt. It is common for them to have questions about some of the documentation you provide.
Don’t be discouraged if this is the case. Mortgage regulations have become very strict, and your lender will need to confirm that all of the requirements are met before providing you a mortgage. As your lender works through this step, let us know if you have questions.