When it comes to buying a new home, it’s important to determine how much you can afford before making any big decisions. There are a few key things to keep in mind to make sure you’re on the right track.
First, consider getting pre-qualified or pre-approved for a mortgage. This is a process where a lender will review your financial information and give you an estimate of how much they’re willing to lend you. Getting pre-qualified or pre-approved can give you a better idea of what you can realistically afford and help you narrow down your home search to properties that fit your budget.
Pre-Qualified vs Pre-Approval – What’s The Difference?
- A Pre-Qualification is a quick way to establish how much you can afford when shopping for a home. It takes less documentation, and often works off estimates to establish what could be a good fit for your home financing. A Pre-Qualification is not a commitment to lend, so some sellers may not accept this when you make an offer.
- A Pre-Approval is a commitment to lend based on a nearly complete loan file review. The only item missing in a Pre-Approval scenario would be the property – the rest of the required loan documentation and details would be fully reviewed by our underwriters. Pre-Approvals offer strong evidence to sellers that you are a serious buyer and have a commitment from your lender to back it up!
What Does the Process Look Like?
- Step 1: Apply with your loan officer. We make it easy – you can apply through our mobile app or on the web!
- Step 2: We’ll run your credit report, review the details you’ve submitted, and any documentation you provide. If you’re looking for full pre-approval, we will give you a checklist and review more documents – which can take just a bit longer.
- Step 3: Get your Pre-Qualification or Pre-Approval letter! Depending on which path you select, we will provide a letter detailing how much you should be able to borrow. This should give you a clear idea of how much you can afford when shopping for a home!
Additional Costs to Owning a Home (BUDGET!)
Don’t forget to also factor in the additional costs of owning a home, like property taxes, insurance, and maintenance. These can add up quickly and impact on your monthly budget, so make sure you’re accounting for these costs in your calculations.
Here’s an outline for things to consider when developing a homeowner’s budget:
- Mortgage payment: This is likely to be your biggest monthly expense as a homeowner, so make sure to factor in the principal and interest payments.
- Property taxes: Property taxes can vary widely depending on where you live, so make sure to get an estimate of what you’ll owe each year and factor that into your monthly budget.
- Homeowners insurance: You’ll need to have insurance to protect your home and belongings in case of damage or theft, so make sure to factor in the cost of insurance premiums.
- Maintenance and repairs: Homes require ongoing maintenance and occasional repairs, so make sure to budget for things like lawn care, cleaning, and repairs like fixing leaky faucets or replacing a roof.
- Utilities: Make sure to include the cost of utilities like electricity, gas, and water in your budget.
- Homeowner association fees: If you live in a neighborhood with a homeowner association, you’ll likely have to pay fees for maintenance and amenities like a community pool or gym.
- Upgrades and renovations: If you’re planning to make upgrades or renovations to your home, make sure to budget for those costs as well.
- Miscellaneous expenses: Finally, don’t forget to factor in other miscellaneous expenses like pest control, home security systems, and any other expenses specific to your home.
By considering all these factors, you’ll be able to develop a realistic and comprehensive homeowner’s budget that can help you manage your expenses and stay financially prepared for the costs of homeownership.
Ultimately, the key is to be realistic and conservative when determining your budget for a new home. By getting pre-qualified or pre-approved and understanding the full costs of homeownership, you’ll be well on your way to finding the home of your dreams. Have any questions? Reach out to your Highlands loan originator today!
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