Buying Your New Home

How Much Can You Afford?
Documents Needed, Importance of Credit & Getting Approved

You've decided to start fresh and purchase a new home. This is a very exciting time for you and we look forward to guiding you smoothly through this process, helping you to efficiently find the home of your dreams.

As you will see, there are several steps you need to take before you move into your new home. The Coldwell Banker® HomeBuyer Guide (contact us and we will provide you with a HomeBuyer Guide) is designed to inform you of your rights as a homebuyer and to introduce you to the world of real estate. When using a Coldwell Banker Sales Associate, you will feel confident your search for a new home will be very successful.

How Much Can You Afford?

Before you can begin to search for a new home, you need to determine your budget and estimate how much you can afford. One of the most important factors in figuring out your financial budget is getting pre approved for a mortgage.

What is a Mortgage?

The first step towards financing a new home is getting pre-approved for a mortgage. A mortgage is an advance of money from your lender that will cover the finances of your new property. Over an extended period of time, you (the mortgagee) must pay the bank back each month a percentage of the money they lent you plus interest, until the total sum is paid in full. This is how most homes are financed.

Documents Needed

When you apply for a mortgage, you will need to furnish information regarding your income, expenses and obligations. To save time, have the following items available for each borrower:

	Two most recent pay stubs
	W-2s for the last two years
	Federal tax returns for the last two years
	Last two months' bank statements
	Long-term debt information (credit cards, child support, auto loans, installment debt, etc.)

Repairing Credit Problems And Establishing Good Credit

At one time or another, most people have put blemishes on their credit reports. If your credit report is tarnished, here are a few suggestions you can do to repair the damage.

Examine the credit report thoroughly and make sure it's accurate. If there are mistakes on the report, contact the credit report agency and ask them to remove the mistakes immediately. Here are some other helpful tips:

	Begin to pay your bills on time and in full. Only use two to four credit cards so that you can keep track of them and do not spend more than your budget
	Keep a separate checking and savings account
	Keep the same job for a few years, the longer you stay put, the better.

Now that you've examined your credit report and are confident that you're in good shape, you're ready to choose between getting pre-approved for a mortgage or pre-qualified for a mortgage.

Getting Pre-Approved for a Mortgage or Pre-Qualified for a Mortgage

Here's the difference:

Pre-approval uses basic information as well as electronic credit reporting to determine whether a lender will loan you money. If you are pre-approved for a mortgage, the lender has given you a commitment to support your new purchase.

Pre-qualification is not a mortgage approval but simply an estimate of what you can afford. When you pre-qualify for a mortgage, the lender also collects basic information regarding your income, monthly debts, credit history and assets, and then uses this information to calculate an estimated mortgage amount. The lender has not yet committed to supporting your financial needs and, therefore, you have not received an actual guarantee of funds.

People who are pre-approved for a mortgage are more attractive candidates to the seller and have a better chance of getting the property when they make an offer. Of course, a lender will only lend you money if they're sure your credit is strong and they're confident you have the ability to pay them back. A bank checks your credit by studying your financial history, income, federal tax returns, pay stubs, and long-term debt information (such as credit cards, auto loans, child support, etc.) to determine if you are a good candidate for a loan. If your credit report is good, then you have an excellent chance of obtaining a mortgage. If not, then you must take the appropriate steps to improve your credit rating.

Getting Approved Deciding Of course, a lender will only lend you money if they're sure your credit is strong and they're confident you have the ability to pay them back. A bank checks your credit by studying your financial history, income, federal tax returns, pay stubs, and long-term debt information (such as credit cards, auto loans, child support, etc.) to determine if you are a good candidate for a loan. If your credit report is good, then you have an excellent chance of obtaining a mortgage. If not, then you must take the appropriate steps to improve your credit rating.

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