Whether you’re in a competitive or non-competitive market, understanding your budget will give you the confidence of knowing if your dream home is within your reach. One way to show you are serious about buying your dream home is to get pre-approved for a mortgage before starting your search.
One of the many advantages of working with a local Bucks County real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and 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 speed up the process once your offer has been accepted.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website.
2 MAJOR MYTH’S HOLDING BACK HOME BUYERS IN BUCKS COUNTY
Potential home buyer often overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.
Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership,” which revealed that “eighty percent of consumers either are unaware of how much lenders require for a down payment or believe all lenders require a down payment above 5 percent.”
- While many believe that they need at least 20% down to buy their dream home, they do not realize that programs are available that allow them to put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket.
Similar to the down payment, many either don’t know or are misinformed about what FICO® score is necessary to qualify.
2. Many Americans believe a ‘good’ credit score is 780 or higher.
To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.