How to Determine Your Buying Power

How to Determine Your Buying Power

How to Determine Your Buying Power

Likely the most important step in the home-buying process is to determine if you can, in fact, buy a home in the first place.

You might think you are ready to buy a home. You may be so eager to, that you have driven by some open houses “just to take a look.” Hold on there, cowboy. Getting your hopes up before doing a crucial part in the home-buying process will only set you up for failure. You first have to meet with a lender, have a look at your finances, and go through pages of paperwork. It may not sound like the most exciting thing, but it is a necessary part of the proper home-buying procedure to determine how much power you have. Here are a few tips on how you can determine your buying power.

Know What Property You Want to Buy

Before you meet with a lender, you need to get an idea of what kind of property you want to buy. Do you want to buy a single-family house, condominium, or a townhouse? Understanding the pros and cons to each will help you decide.

Evaluate Your Budget

Lenders want to eliminate as much risk as possible before approving a loan. They have to make sure you’ll make all of your mortgage payments and fulfill all other financial obligations. In order to do this, they take a look at your debt-to-income ratio – the amount you owe compared to the amount you make.

Determine Down Payment

Cash has dominion in the home-buying game. This is to say, the more cash you can bring to the table the more attractive your offer is to a lender (and the seller). A 20 percent down payment is like gold when it comes to your financial situation. It removes the need for private mortgage insurance and gives your offer that much more credibility and substance.

Do you know what kind of home you can buy? Contact Elvin Wesley at Ranch & Coast Mortgage Group Inc. for all of your home loan needs throughout Solana Beach and San Diego County, as well as all of California.