When it comes time to buy a home, most people need to finance the bulk of their purchase.  Consequently, their capacity to borrow money for your home purchase becomes a critical component in the decision of what home you will ultimately buy.  Most of us would love to live in a mansion, but can we really afford it?

Oddly enough, many people start by making a determination on where they want to live before they find out whether they can afford it.  Then, once they find out that they can’t comfortably afford the home that they decided they wanted, they often will put themselves at great risk to get that home (often buying significantly above their means with loan programs that are not appropriate for their current and future financial situations), or they never buy a home at all while they wait for that “miracle” sale.

Once you have identified your Lifestyle and Financial Goals, the next step is to speak with a lender to see what you can really afford.  Getting a home loan is a dramatically different process than getting a personal or auto loan.  There is a lot more to qualifying for a home loan than just having good credit.

Picking a Good Lender
When searching for financing for your home purchase, you need to talk to several lenders to determine which one will be able to provide you with the right loan program for what you are trying to achieve.  More importantly than just shopping for the loan program, you also need to assess the integrity of the loan officer and lending institution to see if you trust them.  Just because a lender says they can get you the best deal, doesn’t make them the right lender to work with.  Sometimes a loan officer will promise you a deal that sounds great in order to “lock” you in as their client, but in the end they are not able to deliver.  That puts great difficulty on you if you are already contracted to purchase a home.  Remember, it is your earnest money deposit that will be forfeit if you can’t get to settlement.

Understanding the Difference between Qualified and Comfortable
Assuming you have a good income, low debt, and good credit, in many cases, the lender will be able to qualify you for a large loan to purchase your home.  What you need to be aware of is that the fully-loaded monthly payment may exceed what you can comfortably pay on a monthly basis.  When determining what you true monthly cost is for a home, you need to add the following amounts to get to a fully-loaded monthly cost for owning your home:

• principal and interest payment 
• monthly property taxes
• homeowners or condo association dues
• hazard (homeowners) insurance
• utilities
• maintenance and repairs

If you do not calculate these costs into your monthly payment, you may find that while you can get the loan and purchase the property, you will have a hard time making all your payments once you are actually in the house.

Want to Speak with Colin?  Click here.

© 2009 Colin Concannon - All Rights Reserved.  Please review our Terms of Use and Privacy Statement.