June 2011
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Before You Apply for a Mortgage

The era of buy now and pay later has disappeared for most consumers. The easy credit terms of past decades have been replaced by high interest rates and a slate of charges and fees. Mortgages are also harder to obtain now that the government has cracked down on unethical lending practices and banks, faced with huge inventories of foreclosed homes, have raised their standards for new borrowers.

If you are considering buying a home you need to ask yourself How Much Mortgage Can I Afford ? Do this before you start looking at home listings and certainly before you apply for a mortgage. You need to consider your income, assets and current expenses. You also need to project future expenses, including those associated with owning a home, like maintenance, renovations, taxes and insurance. If the amount of mortgage you can afford is in line with the housing market in your area, then you can proceed to the next step. If not, you should probably spend a few years improving your financial situation and then revisit home ownership in the future.

In addition to looking at a simple income and expense budget, you also need to look at your credit and current debt, because mortgage lenders will include those factors when they decide whether or not to approve your loan. Your credit score , credit history, and debt to income ratio are all important to mortgage lenders. You also need to be careful about the home you ultimately choose to buy. You may have good credit and be considered a healthy risk for a mortgage but if you choose to buy a house that is overpriced, has a bad appraisal or doesn’t have a clear title, your mortgage will be rejected.

Make sure you have all your financial and property ducks in a row before you apply for a mortgage and the process will go much faster and your path to home ownership will be a smooth one.


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