Qualifying for a Home
Spending time looking at properties without knowing what you qualify for (and are comfortable with) is like the preverbal “cart before the horse” analogy. This scenario leads more often than not to a letdown for all parties (You, the Seller and the Realtor(s)).
In this day and age of strict underwriting guidelines that include low Debit to Income ratios as well as lower Loan to Value percentages, it is important to know what you can afford, and where you are at from a credit standpoint before you spend too much time perusing the local real estate inventory.
Fortunately, Durango has a number of well run, customer service oriented lending institutions that can accommodate your financing needs and point you in the right direction. Local area lenders range from portfolio/in-house financers to land lenders to originators who shop for the best rates on the secondary market through firms like Bank of America, Chase and Wells Fargo.
There are three primary levels of qualification you will transition through before and during your real estate acquisition:
Prequalification: A financial professional (Loan Officer, Mortgage Broker or other) takes basic financial information from you to give you an estimation of what you can afford and they type of loan you might qualify for, based upon: income, job history, credit scores, available down payment, overall debit relative to Income (DTI ratio), and a few other qualifiers. This information is not verified by the financial professional.
Preapproval: A higher level of prequalification whereby the financial professional verifies the data provided them and in turn provides a better assurance of how much and what type of financing the borrower will qualify for. Typically a preapproval will be given to the qualified borrower/buyer in the form of a letter, which they can share with their Realtor. Sometimes the preapproval letter will accompany a written offer on a property, showing the seller that the buyer is already qualified and ready to go.
Loan Commitment: A commitment by the lending institution (not necessarily the Loan Officer or Mortgage Broker) that commitments to fund the loan to a certain amount of debit, based upon specific criteria and up until a certain period of time. Receiving Loan Commitment during your financing contingency period in a Buy/Sell Contract is good news.
If you would like we would be glad to suggest a lender that suits your needs and compliments your personality. Please feel free to visit our Buyer Agency page for our list of preferred loan professionals.