Know What You Can Actually Afford Before You Shop

Before you jump in the car and begin your new home search, it is crucial to first determine what you can afford. Since a home purchase will likely be the biggest investment you will ever make, you will want to carefully evaluate what your needs really are and if your budget will comfortably cover those needs. Ask yourself these few key questions before you meet with a lender or a real estate agent.

Beyond just the bedroom and bathroom count, evaluate what you need in living spaces for the present and into the future. Is a formal dining room or a separate family room a necessity? Will additional bedrooms be a part of the future if your family is still growing? These extra living spaces add to the square footage and impact the purchase price you must budget for.

Consider what you can realistically afford for your monthly housing cost. Ask yourself if your anticipated budget will remain comfortable even as your family’s needs change. Along with this thought process, look ahead at your income projections to see if increasing monthly expenses will be offset by your ability to have higher income in the future.

It will also be important to have a good idea of how much you can save every month so you can cover any possible loss of income or gaps in employment during the time you own your home.

Once you have satisfied yourself with what you feel you can afford, the next step is to contact me so I can help you get started with a loan preapproval based on tangible numbers. With your preapproval, you can then begin your home search knowing that both your personal needs and budget will be met. Call or email me today and we can get you started.

Understanding the Appraisal Process and What It’s All About

A home appraisal is part of the loan approval. Your lender will need to determine if the home you are buying has the same value as the agreed-upon purchase price in the purchase agreement. An appraiser will be hired to determine the worth of the property.

To eliminate any undue influence on the appraisal process, the appraiser must be assigned by an independent third party and cannot have direct contact with the lender.

The task of the appraiser is to arrive at an indicated value of the property by researching comparable sales within the same geographical area. The sales should be recent and have closed within the last 90 to 180 days. Typically, the appraiser will pull the comparable sales from an online database prior to visiting the subject property.

In addition to obtaining the square footage and bedroom/bath count, the appraiser will note any adverse condition issues with the subject property that may affect the lender’s ability to lend on the property.

After visiting the property, the appraiser will make value adjustments to the comparables where they differ from the subject property: for example, in square footage, bedroom/bath count, condition or location. These adjustments help the appraiser arrive at a value.

Once a value is determined, the appraiser submits the report to the appraisal management company (AMC), so it can be given to the lender. Any questions about the appraisal must be directed to the AMC.

I can further explain this very important part of the underwriting process for your mortgage, and I am just a call or email away.