Mortgage Questions to Tackle Before Starting a Home Search
When purchasing a home, there are multiple moving pieces to consider before taking the plunge and choosing your new home. Whether you use an Arizona conventional loan, Arizona FHA loan, or an Arizona VA loan, each one will have different requirements and expectations necessary in order to qualify and proceed with your home purchase. VA loans are extremely popular for first-time homebuyers especially, given the zero down payment, favorable approval for lower credit scores, and being guaranteed by the Department of Veterans Affairs. If you have a VA loan, here is a helpful list of questions to work through before beginning to search for your new home.
What Is Your Budget?
The very first, most important, step in every home loan process is to determine what your budget can be, and what you are able to spend monthly on home expenses. This includes mortgage, home insurance, and any extra home maintenance or repairs you can expect to face. Once you have set a realistic budget, you can begin your home search with confidence, and only search for homes within your price range.
Begin by determining your debt to income ratio, otherwise known as the DTI. This essentially means lining up your monthly expenses versus your monthly income. List out all the monthly bills you pay, including utilities, student loans, car payments, child support, hair appointments, etc. – literally, anything that is paid monthly must be listed. Then divide that number by your gross monthly income.
Most first-time home buyers lenders in Arizona and VA mortgage lenders require a DTI at a maximum of 43%. Remember though, that 43% is the very highest that you can spend, and does not mean that you should. If you max out your budget with your mortgage, you become “house poor”. This means that you have spent so much money on your home that there is nothing left over for fun, activities, eating out, traveling, and general living expenses. While it may be tempting to spend the most you can in order to have a bigger or fancier home, remember that life must still go on after you purchase the home. You will need to still budget for new furniture or houseplants and other décor, along with inevitable home repairs.
Build breathing room into your budget, and you will be able to fully enjoy your new home without the added financial stress of barely making your mortgage each month.
Do You Have a Reputable Real Estate Agent to Work With?
After determining your budget and setting a realistic price range for looking at homes, your next step is to find a trustworthy real estate agent to lead the way in your home search. Browse reviews online, talk with friends and neighbors, and spend time doing research to find the best real estate agent for you. Remember that someone may have excellent reviews, but after meeting with them you have a difficult time clicking with their personality. This is completely normal and okay. Take the time to find someone you feel comfortable communicating with on a daily basis.
Your agent will be knowledgeable about whether asking prices are appropriate or overpriced, which neighborhoods are ideal to live in, where to find an ideal mortgage lender in Arizona, how to get pre-approved and so much more. They will watch the market like a hawk so they can show you homes that fit within your price range and check the boxes on your wishlist. A good agent always has your best interest in mind and is on your side throughout the entire home-buying process in Arizona.
Are You Pre-Approved?
Before even beginning to look at homes, it is important to find a lender and get a pre-approval letter. Simply put, a pre-approval letter shows in writing the loan amount you can get approved for from the bank. Sellers like to see pre-approval letters when potential buyers put in an offer on their home, as it gives them confidence you will be able to follow through on the purchase.
The pre-approval paperwork includes things such as your credit report, a tentative pre-approval loan amount, an appropriate loan type for you (in this case, a VA loan), and a loan term (length) that will be right for your needs. All of this information puts you one big step closer to making an offer on your dream home. An experienced Arizona Mortgage broker will be able to guide you through the pre-approval process quickly and smoothly.
KHoward Mortgage Team
A VA loan is an exceptionally helpful tool for purchasing your dream home. Start your financing and home-buying process off on the right foot with KHoward Mortgage Team. We offer competitive mortgage rates and fast turnaround times, along with consistent communication and uncompromising support through your entire financing process. Our brokers at KHoward carry years of experience with VA loans in Arizona and will be able to direct you through every step of the process with ease. Call us today at (480) 442-8834 to see why we are the right choice for you!