Arrange Financing

Financing Concerns

Most homebuyers find that they need to finance at least part of their home purchase.  Therefore, the first state in finding the right home is to review your personal financial situation and make an informed estimate of your true purchasing power.  Your purchasing power will depend on:

  • Credit ScoreYour Income
  • Your Credit Rating
  • Other Monthly Expenses
  • Your Down Payment
  • Available Interest Rate

How much home can you buy?

The next four steps discussed will help you review home financing and get you prepared to speak in detail with a lender.  A more thorough overview of the financing process is covered later in this guide.

Step 1:  Make a rough estimate of how much home you can afford based on your income.

Here are a few methods that will give you an approximate starting point for how much home you can afford.

Method 1:  The price of your home shouldn’t be any more than 2.5 times your annual salary.

Chart 1Bchart12b

 

 

Method 2:  A house payment should be no more than 25% of your gross monthly income (before taxes and deductions)

Annual Salary

Gross Monthly Income

Maximum House Payment

$50,000

$4,167

$1,250

$60,000

$5,000

$1,500

$70,000

$5,833

$1,750

$80,000

$6,667

$2,000

$90,000

$7,500

$2,250

$100,000

$8,333

$2,500

$110,000

$9,167

$2,750

$120,000

$10,000

$3,000

$130,000

$10,833

$3,250

$140,000

$11,667

$3,500

$150,000

$12,500

$3,750

$160,000

$13,333

$4,000

Keep in mind that these are guidelines.  There are many other factors that determine how much home you can afford.

Step 2: Take a close look at your credit report.

Your credit History is one of the principal measures used by a lender to determine your interest rate.  The better your credit, the better lending terms your bank or lending institution will be able to offer you.  A higher interest rate translates to a higher monthly mortgage payment, and so your credit score will directly affect how much money you can borrow and at which homes you should be looking.

You should be aware of what information is on your credit report by obtaining and reviewing copies of your credit report from the three main credit reporting agencies.

Equifax
www.equifax.com
1.888.766.0008
TransUnion
www.transunion.com
1.800.888.4213
Experian
www.experian.com
1.888.397.3742

Remember that there are several factors that affect your credit report including your payment history, your current ratio of debt to income and signs of responsibility and stability.  And since not all creditors report to all three agencies, it’s best to order a report from all three institutions.  Your goal in ordering all three credit reports is to make sure that all of the information stated on each report is accurate and correct.

If there are any discrepancies on your credit report, it’s important that you contact the rating agencies and have those records corrected.  Taking the time to verify and correct your credit report before you speak to a lender will help eliminate hassles later on.

Step 3:  Gather the Documents/Take a look at your Assets and Monthly Expenses

Your lending institution will ask you to give a complete profile of your financial situation.  In addition to your income your existing assets and debts will determine how much money that you can borrow.

Below you’ll find a list of documents you may be required to produce regarding your financial situation when you speak to a lender.  It is a good idea to gather these things now and have them on hand.  You will need to provide this information for all primary and co-borrowers.

Improving any of these areas will help you qualify for better lending terms, so keep that in mind before you speak with a mortgage professional.  If it’s possible to pay off a car loan or a credit card balance before you seek financing for your new home, the preferential financing terms that you could receive may save you thousands of dollars over the life of your mortgage.

Step 4:  Talk to a Qualified Lender

After looking at this information for yourself, it’s time to speak to a qualified lender.  A professional advisor will not only be able to give you information on the best rates and terms available in the current market, but he or she can also explain to you what options you have given your unique financial situation.

Talking to a lender at this time will help you get a more accurate idea of what you can afford.  When we begin to look seriously at homes you’ll go back to the lender and shop around for the best loan available.  If you’re still looking for a qualified and experienced lending professional, I’d recommend you speak to:

Embrace Home Mortgages
Dave Shelor
712 N Main Street
Blacksburg, VA 24060
Office:  800.333.3004 x3775
Mobile:  540.250.6002
dshelor@embracehomeloans.com

Alcova Mortgage
Brandon Nicely
2001 S Main St
Suite 103
Blacksburg, VA 24060
Office:  540.552.7150
brandon@alcovamortgage.com

Atlantic Bay Mortgage
Tom Kulis
1001 W Main Street
Radford, VA 24141
Office:  540.639.9711
Mobile:  540.353.6461
tomkulis@atlanticbay.com

 

Farm Credit Country Mortgages
Steven Bowman
102 South Locust Street, Suite 101
PO Box 564
Floyd, VA 24091
Office:  540.745.2071
Mobile:  276.620.1489
SBowman@FCVirginia.com

First Residential Mortgage
Ryan Hunter
712 N Main Street
Blacksburg, VA 24060
Office:  276.782.1677
Fax:  276.782.9205
ryhall@1frm.com

 

Have questions about arranging financing? Please submit the form below or call or email me.


Looking to Buy a Home?

*Required field

Mortgage Calculator

Please enter numbers only without commas or spaces.