Making the right choice when it comes to purchasing a home is a matter of good planning. There is so much to learn, especially on your first purchase, that it's essential to surround yourself with qualified professionals throughout the process. Even with the help of qualified professionals, you'll need to understand, in a general sense, how the process works. Our hope is that this article we be a very helpful introduction to the process of buying a home and qualifying for a mortgage.

Affordability and Financing

The question of "How much can we afford?" is largely answered by comparing your income to a) your future mortgage payments, property taxes, homeowners insurance and mortgage insurance if applicable, and b) the three previous expenses plus all other debt servicing costs that you regularly pay on a monthly basis, this is commonly know as your DTI (debt to Income) The DTI Ratio often includes the payments you make on credit card debt, automobile loans, existing lines of credit and student loans as well as other similar loans.

The current maximum ratios for individuals and couples are 31% and 49% for DTI. In English, this means that lenders will allow you to use a maximum of 31% of your total pre-tax or gross income to pay for your mortgage payments, property taxes and Insurance. And a maximum of 49% of your total pre-tax or gross income for these payments plus all other debt servicing cost you may have –see previous paragraph for examples.

By using these ratios a we can help you select a price range for you new home that you are going to be comfortable with and let you know what the maximum price that you will qualify for is, helping to limit any disappointments down the road.

At this point we can also present you for pre-approval. Before you're automatically pre-qualified, your mortgage agent will need to run a credit bureau report and receive written confirmation of income and how much you plan to put down on your purchase.

This pre-qualifying stage is also a good time to find out about the differences between conventional mortgages, Variable rate mortgages, Alt "A", less than perfect credit, and zero down mortgages. Ask about the option of using a gifted down payment to help you qualify.

Applying For Your Mortgage - A Checklist

• A copy of the Sales Contract and the land survey (if applicable).
• One months paystubs.
• A salary letter from your employer if transferring or starting new employment.
• Most recent two years W-2's.
• Self-employed individuals need financial statements for the past two years as well as personal income tax returns.
• Two months most recent bank statements for all checking/savings accounts 
• One months most recent quarterly statement for all investments (i.e. money markets, mutual funds, IRAs, 401-K, stocks, etc.) 
• In all cases, financial documents will be needed to verify your down payment.
• If you are buying a home to be constructed, bring a copy of the building plans, specifications, and your agreement with the builder.

With these documents in hand, we can move quickly to secure a mortgage approval once you've found the perfect home. As soon as your real estate agent draws up a Sales Contract between you and the seller (this agreement sets the final price and all the conditions of sale), come back to your mortgage agent and your deal is almost complete.

Making House Hunting Fun

Take the guesswork out of shopping for a home by taking advantage of all the professional resources available to guide you through the many choices available when purchasing your first home.

The Next Step

This Article offers an outline of the basic steps to buying a home and qualifying for a mortgage. But it has probably left you with a few questions. We would love to hear from you! Please call and talk to an Andrews Mortgage Solutions Specialist now at:  352-369-5626 or contact us.