Posts Tagged ‘pre approval’

Mortgage Questions

Some of the most commonly asked mortgage questions.

When it comes to buying a house you want to ensure you follow all the rules and do your homework. Buying a car may be a big financial decision however, for the average person, signing your name on a mortgage will probably be the biggest financial decision you will ever make. Below are a list of the most common questions you should know the answer to before you sign the mountain of paperwork. I am going to start this series of posts and over the next several months answer each of these mortgage questions.

• Can I afford to buy a home?
• How much money should I spend on a home mortgage?
• What are the differences between mortgage pre-qualification, pre-approval and final loan approval?
• What first-time buyer programs are available?

• What types of mortgages are available and which should I choose?
• Can I use my IRA retirement funds as a down payment on a home?
• Should I pay points on my mortgage?
• I have poor credit are there still options for a mortgage?
• What are front and back ratios?
• Is it still possible to get a loan with no money down?
• What is PMI (Private Mortgage Insurance? Why do I have to pay it?
• I know it used to be simple to get a mortgage? Is it still that easy?
• Can I take out a second mortgage and use that as a down payment for the first?
• Should I pay extra on my mortgage each month?
• Does it matter how long I have been employed? Will this effect my chances of getting a mortgage?

Once I have answered all these mortgage questions I will open the post up for comments. You can ask your own mortgage related questions and I or members of the blog will give the best answer we can. Please note I am not a professional or have any qualifications in this field, everything you read here is my personal opinion.

Mortgage preapproval doesn’t mean you can afford it

You should always get a mortgage preapproval from a lender before shopping for a home. A pre approval letter lets the buyer know you are a serious buyer. More importantly it gives you a general price range of the houses you should be considering. However, just because you get a preapproval from a lender for a certain amount of money doesn’t necessarily mean you can afford that much house.

Many times borrowers will get pre approved for a certain amount of money, but buying a home at this price may stretch your budget too thin. There are many budget items that a bank doesn’t look at when deciding to give a preapproval amount. For example, I just used a preapproval calculator online with my own personal finances. I would be preapproved for a home loan of $456,000. Currently our home is less than half this amount and we don’t really have a lot of money left each month to save.

Many things the lenders don’t consider when giving a preapproval mortgage amount include daycare, enertainment, clothing, groceries, tithe or donations, etc. Sure most of these things aren’t completely necessary but you will need some type of budget for these items.

You should always get a mortgage preapproval before shopping for a loan, but do a detailed budget to find out how much home you can really afford. Part of the problem with the current credit and bank crisis is because of what I have just discussed. Don’t leave it up to someone else to do your homework, do your own research. After all no one else knows your money better than you!