The housing market in Dallas-Ft. Worth is so hot, it can be stressful and even depressing for those looking to buy a new home. Here’s just a few of the challenges we’re hearing from those in market.
- Homes are getting snapped up and going for over the asking price
- Homes are selling the same day they are listed
- You’re one of many other bids competing for the same dream home
Plus, there’s the added stress of getting the kids settled before the new school year starts. That’s why The Tuttle Group put together tips to help you successfully purchase your dream home, even in an extremely competitive market.
Talk to a Lender Before You Look at Homes
Talk to a lender first. We know that may sound a bit backward and you’re thinking “I just started working with a Realtor.” We understand – but trust us. There are a few reasons you want to do this.
In working with a lender, you’ll be able to understand not only how much you can afford to spend on a new home, but also the amount of money you should spend on a new home. This will make sure you’re not wasting your own time looking at homes you really can’t afford.
We’ve seen it happen. People put in an offer on a home, it’s accepted and once it gets to contract, the buyer cannot close on the home because they really don’t understand how much they will qualify for when it comes to a loan.
- Sometimes it is something you’ve forgotten about that is hurting your credit score.
- Other times a buyer realizes while they may technically be able to afford an amount, it will make money tight and change their lifestyle
We don’t let our clients end up house rich and cash poor. That’s why we work with you – before you start looking at houses.
If you start looking at houses – without first really understanding what you can comfortably afford – it’s easy to keep upselling yourself. We’re human, too. We get it. Common sense goes out the front door when you see something you love.
How Much Home Can I Afford?
There are a few key factors that really impact how much you can afford to spend purchasing a new home. A good lender will discuss all of these items with you as part of figuring out how much money you should spend on your next home.
- Credit Score. Your credit score will impact the interest rate you receive, which determines how much it will cost you to borrow money. The FICO credit score that is used for purchasing a home is different than the one used if you buy a car or jewelry. That’s why people oftentimes are surprised to find out their FICO credit score since other purchases have gone smoothly. It can be a forgotten medical bill or something from a number of years ago that shows up again. Those dings can lower your score. That’s what it’s important to find out your accurate credit score through your lender.
- Down Payment. The amount of money you plan to put down will impact how much you can plan to spend. The more money you put down, the less you will have to finance, the lower your payment will be, and in most cases the terms will improve. Finding the right balance between down payment and liquidity is an important topic to cover and is a critical decision in helping you achieve your financial goals.
- Income. The amount of money you make as well as how you make your money can impact your home purchase. If you are self-employed the income qualifications are different than someone who has a corporate job. There also are a number of different loan programs for certain professions, including doctors and civil servants. Veterans have options available that make home ownership easier. No matter how you make your money, we’ll help you find the best loan for your financial situation.
- Debt-to-Income Ratio. The amount of money you can spend on a home is impacted by the amount of outstanding monthly payments you have on your debt relative to your income. We’ll discuss this with you and determine if it may make sense to pay off some of your debt and put less money down on a home, as an example.
Pre-Qualification vs. Pre-Approval
Before you put in an offer on a house, you need to be pre-qualified. You need a strong pre-qualification letter for your offer to get accepted. And yes, this needs to be in writing. If you only have a verbal pre-qualification (meaning you only told the lender your income and asset story with no documentation), it’s unlikely your offer will even be considered. Ideally, you’ll go through the full pre-qualification process, which means you send in your documentation for review by our team. Once you get your needed financial documents submitted, we can provide a pre-qualification in 48 hours.
Even better is to get pre-approved to purchase a home. That’s really what listing agents want to see – an offer that is pre-approved. That means your financial documents already will have been reviewed and an underwriter has issued a full credit approval so you know how much house you can afford. This takes an extra 5-10 business days but will drastically speed up the process once you get a contract.
You Can Do This!
We know the home buying process is intense. To have the best experience possible, while also minimizing stress, we urge you to visit your lender first – before you start looking for your new home. Then you’ll have a good sense of how much money you can comfortably spend. It will help keep you in a logical state of mind as you start looking at houses and you’ll know what your budget is, which will make it much easier to stay within your comfort zone.
