Should we try to get pre-approved for a mortgage now or wait and continue saving?

Question

Our take home pay is about $4350 per month. We pay about $300 in credit card bills and about $170 in school loans every month. We have no other debt. We have about $5000 that we could put towards a down payment/closing costs. Should we even try to get pre-approved for a mortgage, or will the banker laugh in our faces?

Answer 1

I don't think you realize how much better off you are right now than a whole lot of people.  I have been in the mortgage business for about 4 years and you are doing well, believe me.

Home buying right now is hard.  Values are dropping, it is very hard to get approved, etc., however it just seems like it is only getting harder and harder to become approved and my suggestion would be to jump on the bandwagon while there is still one to jump on.

You could probably find a seller willing to contribute to your closing costs so that you could use most of your money for a downpayment.  Be advised however that most lenders will require you to have some money left in the bank to make your mortgage payments for 2-3 months if you lose your job.

Answer 2

Nobody will laugh in your face, you are doing alright. My suggestion is, to save as much as you can for a down payment, because you get better interest rates from the lenders, as more you pay down. 30% is glorious and will give you top of the line mortgage deal. Even 20 % is not bad, but less then that and it will get you higher interest rates.

Answer 3

It depends what price range you are thinking of.  The more you have down the better and the lower your monthly payments will be.  Do get prequalified but don't allow yourself to be pressured into buying.

Answer 4

No good lender would ever laugh in your face, it's their job to help you! It certainly sounds like you are in a pretty good position, but there are a few other qualifying factors your lender will evaluate. But so far, so good! Get in touch with a reputable lender and see what the numbers look like. Now is a great time to buy - prices are low and you can take advantage of all the tax credit.

Feel free to contact me directly though my profile. Best of luck!

Answer 5

Remember the pre-approval is usually only good for about 60 days.  So if you know for certain that you are ready to buy, it makes sense to get pre-approved.  If you are not sure that you will want to buy within the next two months, then wait, because you will have to go through the process all over again and your credit score may take a hit from the additional inquiries.

Answer 6

I would definitely get pre-approved now, and ask your lender about first time buyer programs that help with downpayment assistance, or other buyer programs such as Genesis and Nehemiah.  My son bought his first home (he's age 22) and the County that he purchased his home in had a first time bond program for buyers.  He was able to get $5400 dollars in assistance that he does not need to pay back if he stays in the home for three years.

Answer 7

You, like most people in your situation are caught between a rock and a hard place. While it appears you have extra income to spend on a mortgage payment, you need to carefully consider how much you can afford on a monthly basis...then back into how much house you can buy for that payment. Without knowing how much of a payment you are looking for or what part of the country you are located in, I'm assuming you will buy a average home.

The difficult part of your situation is that likely, the $5,000 you have saved will probably not even cover the closing costs (attorney fees, lender fees, etc.) However, home prices across the country and with many foreclosures, you can probably find a really good buy.

Go speak with a mortgage lender and try and get pre-approved. Be sure to ask your lender (based on an average selling price) how much of a down payment and cash would be needed for closing.

Please understand that many "pre-approvals" are a snap shot in time. Understand that many lenders will issue a pre-approval letter only to come back later in the application and require additional documentation and information that could completely change the deal you were hoping to get.

Also, the mortgage industry is going nuts right now. Depending on the price of the house you plan to buy, $5000 may not be anywhere close to enough for a down payment.

Just go talk and see what your mortgage broker says. I wish you luck.