Many people are shocked to learn how expensive it is to buy a home. One of the most important things to do before buying a house is to prepare financially by saving enough money to cover the initial costs and to create a financial cushion for the ongoing expenses.
Start with your budget:
Budgeting is the best way to get a solid handle on what you can truly afford. Budgeting helps you accomplish two goals: staying in control, and seeing the big picture. Identifying a budget prior to house hunting will help you achieve these goals over the long term. To learn more, check out our articles about Building a Budget and Sticking to a Budget.
How much is too much?
There’s nothing more frustrating in the home buying process than falling in love with the “perfect” home only to learn that it’s out of your price range. A good way to figure it out is to get prequalified or preapproved, but here’s a quick formula that will get you in the ballpark:
Why prequalify?
Prequalification considers your credit and existing debt and gives you an idea of how much mortgage you are qualified to hold. This is very helpful information when looking for a home, and it’s free. Your budget and prequalification amount help you develop clear expectations regarding home price ranges.
Consider if preapproval is right for you:
Preapproval is a more extensive process where the lender commits to provide you the loan. To get preapproved, you will need to submit information that shows lenders your ability to pay back what you borrow. To figure this out, lenders will look at your income (pay stubs and tax returns), your assets (savings and checking account statements), your payment history (credit report), and maybe more.
ESL strives to simplify the mortgage process. Here are our five steps to get a mortgage.
