If you’re about to purchase your first home but aren’t quite sure if you’re ready, this is a sign that you may not be. Rather than rushing into things simply because you want to own, it’s best to take time to prepare yourself, including figuring out how much mortgage you are able to afford. Below are a few questions you should ask yourself in order to determine if you’re ready to launch into buying. Beyond helping you understand more about this major investment, the answers can give you an idea of things you’ll need to do to get yourself ready.
Have You Gone Through the Pre-Approval Process?
Pre-approval is hands down one of the most important steps you can take towards buying a home. It’s important for many reasons, beginning with the fact that it will ensure you’re in a good financial position to actually purchase a home. This is due to the fact that lenders verify your income and financial information to determine how much of a loan you can afford. Once you have this, you can shop more confidently knowing approval won’t be out of reach.
Are You Planning Major Purchases?
If you’ve been waiting to make major purchases in addition to buying a home, such as buying a car or financing another vehicle, you should hold off a bit longer. Once you have pre-approval finalized, any major financial decisions can affect your credit score. Unfortunately, this can mean you won’t be pre-approved for the same amount that you were before or you may not even be approved at all.
Do You Know What You Want in a Home?
One of the biggest advantages of getting pre-approval done before you search for a home is the fact that it will tell you how much you’ll be approved for once you’re ready to buy. Of course you can shop under this number as well, depending on what you’re comfortable with. The best part about having this number is being able to narrow down your search for a home. For example, with a clear budget in mind, you will know that you may not be able to afford the 5-bedroom home in the nice neighbourhood that you had in mind. Instead, you may have to decide if you’re willing to sacrifice the neighbourhood in order to have the number of bedrooms or square footage that you want.
Are You Prepared to Negotiate?
While your real estate agent will certainly help you negotiate for the home that you like, you can help with this as well by getting pre-approved for a mortgage. Sellers are more willing to work with buyers who have this because it shows they can afford the home and are serious about buying. In addition to this, pre-approval can mean being chosen over other bidders who did not come prepared with this same document.
Do You Want to Lock in an Interest Rate?
One thing a lot of buyers don’t realize is that pre-approvals from most lenders come with 90-120 guarantees on interest rates. This means the rate that you’re given will not increase within that time, although interest rate decreases in the market will be honoured. If you don’t want to be shocked by a higher than the anticipated interest rate, this is one of the best ways to protect yourself.
After asking yourself these questions, it will be clear why getting a pre-approval is so important and one of the first things you should do when buying a home. Fortunately, there are many more advantages of doing so, making it all the more worth it!
