Murrieta Real Estate Pre-Qualification for your New Murrieta Home. Back to Communities - Murrieta Homes

Pre-Qualification

The biggest mistake most home buyers make is to begin looking at homes or even selecting a home before they know how much they can afford. This can lead either to disappointment or surprise, but it almost never leads to ultimately purchasing the first home selected. Purchasing Murrieta real estate should be considered carefully with a honest evaluation of affordability.

Mortgage lenders work within certain guidelines when deciding whether to approve a loan. They use terms such as income-to-debt ratio, principal, interest, amortization, mortgage insurance premium and FICO score to discuss what they can or cannot do for you, the home buyer. It seems logical, then, that you should become informed about these terms and about what the lender looks at when you apply for a loan for your Murrieta home. This is the information you need before you even begin to hunt for a home.

If you have done your homework and gathered all your records, set up a budget, evaluated your financial status and requested a credit report, you are prepared for the first step in learning how much you can afford to borrow in the purchase of your Murrieta real estate transaction. This means an understanding how lenders determine what you can afford to borrow and, therefore, how much you can afford to buy.

The following information will help you begin to explore what type of Murrieta Real Estate you can afford to buy. Because you need to understand the components of a mortgage and how it affects your buying power, you should review the overall process as you begin. As you proceed through the process and finally choose a Murrieta home to buy, you will need to look at all of the financial alternatives in order to make a decision. Please use this overview to navigate through the first steps.

Pre qualification and Pre approval

One easy way to find out how much you can afford is to get pre qualified by a mortgage lender. This is a step you should take early in the process. Most lenders will be happy to tell you how large a mortgage they might offer you. Ask family, friends and your real estate agent to suggest a reputable lender.

At the pre qualification stage, you do not need to commit yourself by paying an application fee and actually applying for the mortgage. Lender pre qualification is an informal letter that allows you to see how much you may be able to borrow. It only offers general ballpark ranges of your buying power; it does not obligate the lender to approve your loan.

A better option is pre approval. This is a lender's actual commitment to lend you money. A pre approval letter shows what you can afford and demonstrates that you are serious about buying a home. While you can get pre qualified over the phone without submitting paperwork that tells a lender your income, long-term debts and potential down payment, you can get pre approved only by submitting financial records and going through a preliminary approval process. The lender will want to see:

• pay stubs for the past few months
• proof of other income
• recent bank statements
• tax returns for the past 2 years
• information on long-term debt

The lender then runs a credit check and makes sure that everything you have submitted is accurate.

Getting pre approved for a loan tells you what your borrowing limit is and even how much you have to pay each month if you borrowed as much as you could. Once you know your upper limit, you can decide how much you want to borrow and how much you want to pay per month. This monthly figure plus your down payment will establish the upper price limit for homes you are looking at.

A pre approval does not mean that when you finally begin to look for a mortgage you are automatically approved. There may be a significant time lapse between the time you are pre approved and the time you actually find a house. People may change jobs or divorce or somehow change their financial status. In that case, the lender may do a second credit check to update your file or to see if you have changed your debt load or debt-to-income ratio. That is why most financial consultants advise potential home buyers not to make major purchases or add substantially to credit cards once they have been pre approved

If you need any information on Murrieta Real Estate or Property please check our Murrieta Homes section on this website or contact us at any time.