When thinking of purchasing a home many buyers do not know where to start the process. While it is generally a good idea to get a feeling for homes that are available for sale through sites like Redfin, financing is usually going to be the right first stop for most buyers. Talking to a lender will inform the buyer of how much house they can afford and what they can expect to pay per month to live the way that they want to live.
Before contacting a lender directly, a buyer can get a general idea of the amount they will qualify for through sites like Nerd Wallet. Their calculator will allow a buyer to enter information such as income, monthly debt obligations, and even location and will provide an estimate of both the amount the buyer may qualify for and the interest rate. Interest rates will vary slightly by location across the country so if a buyer is looking at mortgage rates Boise ID the rates could be slightly different for a nearby city like Spokane WA. Potential buyers should keep in mind that estimates from sites like Nerd Wallet are just estimates and are not sufficient to use in an actual transaction, however, they will be fairly close.
Once a buyer has determined that they might reasonably qualify to purchase a home that they would enjoy living in they should speak to the lender that can actually pre-approve or pre-qualify them. Without approval from a lender, it is almost impossible to submit an offer on a home and have it been accepted in the current real estate market. The lender will request similar information to the online calculators such as income and monthly debt obligations, but the difference will be that the lender will require proof. This proof will generally come in the form of providing pay stubs or tax returns to verify income and the lender running a credit check to make sure that all debts owed by the borrower were reported to the lender.
Once all the verification has been completed a potential home buyer will have a much better idea of their price range and be able to narrow their search to homes that will fit their budget. They will likely then work with a Realtor who will show them multiple homes and help make strategy recommendations when writing an offer. As mentioned before it is highly unusual for an offer to be submitted in today’s market without approval from a lender for the offered amount. If the offer is lucky enough to be accepted by the seller the escrow process starts and the buyer will conduct inspections of the property while the lender works to fund the loan. If all goes smoothly with the inspection and no major problems are found, escrow will proceed as planned and the home will close escrow as agreed upon in the original offer. For those just starting the process this may seem like a long way off, but after taking the first step of contacting a lender, the dream of homeownership will be well within reach.