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How much can you afford?

The best person to determine how much you can afford is you.  You should figure out your personal budget and come up with an amount that you can pay for your monthly mortgage that you feel comfortable with.  Most people actually qualify to borrow a larger mortgage than what they feel comfortable paying,  And that is why the first place for a new homebuyer to start is with their own budget.

Quick and dirty calculation for how much you can borrow
Your gross income (before taxes) minus monthly debts multiplied by 0.38
$3000 (monthly income) – $700 (debt payments) x .38 = $874.00 (maximum monthly mortgage payment)

This is just a guesstimation that you can do on your own to determine your maximum monthly mortgage payment based on your income.

How to get prequalified

1) Most importantly, get a recommendation for a mortgage broker or banker from a friend, relative or your real estate agent. Someone they have used and trust.

2) You should have some information prepared BEFORE you speak to the loan officer

• Your gross income, including child support, SSI, trust fund etc.  +overtime, bonuses
• your monthly debt payments, student loans, car payments, credit card payment etc.
• your total assets, cash on hand, 401k, stocks, bonds
• your address or addresses for the past two years
• your employers name, address and phone number for the past 2 years
• think about how much you will be putting down if anything and what money you will use to pay for closing costs (more about this later)

3) Your loan officer will review all of your income, debts and assets to determine the amount of financing you can qualify for.

4) The loan officer will also need to pull your credit profile.  Your credit score is a very important component to determining your ability to get financing.

Once the loan officer has determined how much money you can qualify to borrow, they will issue you a prequalification letter that will state how much you are qualified to borrow.  This letter will be required by your real estate agent to submit along with your offer on a home. (note: you should ask your loan officer to write the prequalification letter for the same amount that you are offering on the home you want to purchase and not more,  you do not want to reveal the maximum you are qualified to borrow)

Pre-qualification vs Pre-approval

To get pre-qualified your loan officer will simply ask you questions about your finances. What your income, assets and debts are and run your credit to ensure that you will be eligible to borrow the amount you are requsting. The pre-qualification is usually based solely on the information you have provided, without documentation to verify it. A letter from your mortgage proffesional stating the amount you can likely borrow will be required by your real estate agent.

Pre-approval on the other hand is a step further. To be pre-approved you must provide all the documentation necessary to complete a full loan application. That application is then reviewed by the lender and the lender give a conditional approval. The pre-approval is much stronger because it means the lender has actually reviewed your personal financial documents, your application and determined that you meet their criteria.

Contact Dale Archdekin today to get prequalified for free.

Dale Archdekin
Mortgage Consultant
Mega Mortgage
Cell: 215-370-1236
Office: 215-357-6342
Fax: 215-389-8973
www.megamortgagepa.com

Contact us today to buy sell or refinance a home!