Define price range before shopping

 

Part 2 of Low inventory drives real estate market

 

HONOLULU ADVERTISER , July 31 2005

BY LISA SCONTRAS

Custom Publishing Group

 

Many renters who have grown tired of leasing their home have been enticed lately to jump into the home-ownership fray by attractive mortgage rates and mortgage products designed to enhance buying power.

 

Unfortunately, some of these would-be homebuyers have had their purchase offers fizzle when they failed to take the most important first step in financing — defining their price range.

 

As a broad generalization, most people can afford to purchase a house priced approximately three times their total gross annual income, assuming a 10- to 20-percent down payment and a moderate amount of debt.

 

It is critical to consider how much you can afford to pay before you start looking for a house. Considering affordability early on will save you time and money because you won’t bid on unattainable houses. It’s best to sit down with a loan officer and thoroughly discuss how much a mortgage will actually cost you and what different financing options are available to you, given your income, borrowing needs and credit history.

 

The lender will review your earnings information, credit history, employment history and assets, then calculate your gross monthly income minus your recurring monthly obligations. This will determine a monthly mortgage payment that fits your budget. Though it sounds daunting to a first-time homebuyer, an experienced real estate agent will help you to coordinate this process and put you in the good hands of a reputable lender.

 

After talking to the loan officer, have the lending institution issue you a “pre-qualification” letter. Having such a letter will signal to sellers that you are a serious buyer and that your offer is backed-up by the ability to come through with a mortgage.

 

Start by looking first at what your budget can handle on a monthly basis, and then go shopping. Avoid the champagne-taste-on-a-beer-budget letdown that buyers sometimes realize when they shop first and ask questions later.

 

back to Helpful Articles for About Hawaii

 

view Part 1 of this article