Before you start looking for a home it is a good idea to get pre-qualified. Pre-qualification gives you a good faith estimate of your financial and buying power. It gives you an opportunity to know how much down payment you are prepared to make, how much loan you can get and what price range best suits you. Once you know what range of prices you can afford your house hunting process become more efficient and help you calibrate your expectations.

Pre-qualification also makes you a stronger buyer. This means that the seller will take you more seriously. The main factors that determine your buying power includes:

Typically if you can make 20% or more you can avoid any cost of mortgage insurance. However, you can purchase a house by making a down payment less than 20%, many in fact cannot afford to pay 20% or more. If you can pay 25% or more you may also qualify for special loan plans that can save you money in the long run. Talk to your lender to learn more or call us.

Your loan amount is the total sale price of the house less down payment. Typically lenders require that your monthly mortgage payment should not exceed 28% of your monthly gross income. The monthly payment generally includes loan principal, interest, taxes and any insurance. The total debt ratio needs to be such that combining all your existing monthly debts including your monthly mortgage payment should not exceed 36% of your gross monthly income.

The lender will check your credit history, stability of your employment, outstanding debts, other incomes, assets, bank accounts etc. to determine your loan. It is therefore important that you get pre-qualified so there are no last minute surprises.

There are many loan programs and it is best to consult with a loan officer to find out what is the best program for you.

When you buy a home there will be other costs that are detailed in what is called "closing costs". This amount may range from 2% to 5% of you actual loan amount. Closing costs are to be paid at the time of settlement. If you work with CGRI we can make an assessment of how much closing cost you will incur so you can be prepared. In some cases closing costs can be rolled into the actual loan amount. Closing costs typically includes points and fees associated with the transaction.

You can learn more and use our pre-qualification calculator at Resource Center