Plan your budget before investing on a property
Owing a property gives a person financial security but before
buying any type of property be it home,land or some commercial
property it's very important to estimate your
budget.Pre-qualification is a very essential step in going for a
property deal. There are various ways of pre-qualifying but good
idea is to get help of a lender before you even start to look
for a home. Pre-qualification lets a buyer know exactly how much
a lender is willing to loan him and helps the buyer to save a
lot of time, money and even your efforts will be in right
direction. Often the first time buyers get puzzled about the
estimation of their mortgage payment that they will be able to
handle each month. They even have to decide how much money they
need for a down payment and closing costs. That's why it is
advisable to meet the lender before going any further.
Pre-qualification does not obligate buyers to take a loan from
the lender, nor should it involve any fees. Until the buyer
actually go for the loan.
Another way of pre-qualification is to meet some good real
estate professional and get his advice. This is not compulsory
but can be considered as one of the good methods to be followed
in pre-qualification. Real estate agents help the buyer more
easily as they are the people who constantly monitor the market
scenario. The market trends are clearer to them and even they
have large contacts in financial institutions which can help the
buyer. Usually pre-qualified buyers have an edge while making a
deal with the seller as he knows that there is some lender ready
for making the deal to happen. It helps you to negotiate the
deal on you terms and make it more flexible.
When the lenders pre-qualify they are more concerned about the
paying capacity of the buyer. With that the lenders also check
for the other debts the buyer has or what is the monthly
expenditure of the prospective buyer. There are different
methods of deciding for the loan by the lenders. Loan plan is
done according to debt-to-income ratio. In case of higher
debt-to-income ratio one factor that influences the lender to
allow loan to the buyer is more downpayment.Usually the
debt-to-income ratio is between .28 to 1 and .38 to 1. The
general theory in lenders circle is that a person who has
invested more in the purchase is less likely to be a defaulter
.What buyers usually realize that the pre-qualification process
will produce a home purchase price that is roughly 2 to 3 times
their gross annual income. Since the lender's calculations will
also consider a buyer's actual debts and ongoing expenses, the
loan pre-qualification amount may be higher or lower.