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If you're planning to buy a house, it's wise to get preapproved by mortgage companies before you start your search for a home. It's exciting to go to open houses or scout around looking at properties with a realtor. If you don't know whether you can get a loan, however, you're wasting everyone's time. There are many factors that will determine whether you'll be viewed as a good risk as a homebuyer. In recent years, banks have tightened up their scrutiny of applicants to avoid a repeat of the last housing crunch. How Much Can You Afford? You may be dying for your dream home no matter the cost. It's wise to use caution when calculating what you think you can afford. A rule of thumb is having a maximum monthly payment equal to one-quarter or one-third of your take-home pay. Remember, as a homeowner rather than renter, you will have to pay for repairs and maintenance as well as your PITI. PITI stands for payment including taxes and insurance. It all adds up and you don't want to end up "house poor" which means that you can't afford to do anything else but sit in your house. What's Your Credit Score? Everyone needs to have a decent credit score before being preapproved by mortgage companies for loans. This means that you need to have a track records as a responsible bill payer. The interest rate you get, if you are approved, will depend on your score. If you have been hit-and-miss paying your bills, it's likely that you'll either get denied or have to pay extra for being a higher risk. If you've made some mistakes in this area, it's wise to wait a bit before applying. Spend a few more years building a better credit history and score. Do You Know Where Your Paperwork Is? In order to be preapproved by the mortgage companies, you're going to have to show them who you are with your paperwork. You're going to have to come up with a couple of years of income tax records, paystubs, bank statements, and anything else related to your finances. Your employer will also have to vouch for your job performance and that they plan to have you employed for a while. If you can't remember what happened to your income taxes and all your paperwork is disorganized, it's time to find everything before approaching the bankers. Buying a house can be an exciting realization of the American dream. If you want your dream to become a reality, you should get preapproved by mortgage companies. Figure out what you can truly afford, find out your credit score, and gather up your paperwork. There are plenty of helpful mortgage companies in Michigan that can make sure you have exactly what you need. For more information, visit http://www.arbormortgage.com.
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