Despite today's relatively low interest rates, it's not always easy to get financing. Lenders are
more cautious because of the problems they incurred in the '80s, and banks and other institutions are more stringent than ever about the qualifications of people applying for home loans. But with specific knowledge of what you can afford and how to make yourself a more desirable prospect, both house-hunting and securing a loan can be made easier.
It is not unusual for first-time buyers to be somewhat baffled about how to estimate what mortgage payment they will be able to handle each month, plus how much money they'll need for a downpayment and closing costs. That's why it is a good idea to get pre-qualified through a lender before you start to look for a home. Pre-qualification lets a buyer know exactly how much a lender is willing to loan them. Obviously, with pre-qualification in hand, the buyer can save a lot of timeand frustration.
Usually, pre-qualified buyers have an edge when making a purchase offer because the seller knows that there is at least one lender ready to make the sale happen. In a close market, sellers will prefer a pre-qualified buyer to one who hasn't started the process. For help in obtaining pre-qualification, buyers can consult a local realtor or lending institution. Your agent should be able to direct you to a lender that can help. In many cases, real estate brokerages now have lending companies in their office that will pre-qualify buyers. Pre-qualification does not obligate buyers to take the loan from the lender, nor should it involve any fees (until later, when actually applying for the loan).
When a lender pre-qualifies a buyer, they are more concerned about the buyer's ability to pay back the loan than the price of the property. For this reason, lenders are interested in more than just a buyer's income. They also want to know how much existing debt a buyer has, what his or her on-going financial obligations are and what the buyer's monthly budget looks like.