Experts: Know what you can afford before purchasing a home

Source: AJC – Real Estate Saturday

Imagine heading out to the mall for a big day of shopping. You know what you want, but you have no credit card to pay for it all.

That scenario is similar to going house-shopping without knowing just how much of a mortgage you’re qualified for, said Brian Cueny, a home mortgage consultant for Home Services Lending, an affiliate of Wells Fargo Home Mortgage. Cueny spends much of his day getting buyers pre-qualified for home loans.

“Essentially, being pre-qualified gives you a comfort factor,” Cueny said. “It also makes you a more educated consumer, you know exactly what you can afford. You know exactly what monthly payments you can handle before you ever sign a contract.”

Getting pre-qualifying can be done on the phone, in person or online. Applicants need to supply key personal information as well as details on their credit, income and assets. In some cases, the approval can be granted in as little as 30 minutes, Cueny said.

“It’s definitely becoming the more common approach,” he said. “Probably 75 [percent] to 80 percent of the people I’m working with get pre-approved. That way, when they do find that perfect house, they can react immediately.”

Having a pre-qualifying letter also gives you an edge when you make an offer on a house, Cueny said.

“If there’s another buyer also making an offer, your pre-approval will be more competitive.”

Cueny’s wife, Andrea, is on the other end of the home-buying business. As an agent with the Sandy Springs office of Jenny Pruitt & Associates, she works with buyers to establish what they’re qualified to buy before they begin shopping.

“I always tell my clients that the first step in the house-hunting process if pre-qualifying, not searching,” she said. “what you qualify for and what you’re comfortable paying are often two different numbers. You need to know what it will cost with taxes, insurance, etc.”

Both Cuenys are seeing more sales contracts with mortgage-qualifying contingency clauses, making the  pre-qualifying  process even more important.

“If you’re in a contract with a loan approval clause and you have only about 15 days to get it done, you stand to lose your earnest money if you don’t get it done,” Andrea Cueny said. “And if I’m working with the seller and I get a contract without a  pre-approval, that’s my first [concern]. Why would we want to negotiate with someone who hasn’t figured out how they’re going to pay for this house?”

Andrea Cueny also like having clients who are  pre-qualifying ed because it prevents lot of heartache.

“If I show you everything in the $800,000 neighborhood that you love, buy you find out you can only qualify for a house at $500,000, that’s not a good fit,” she said. “I could show you a $300,000 house, and then you’d find out you’re only comfortable looking at houses for $175,000 or $200,000. Before you start jumping up and down in that house you love, you need to know what it will cost you every month and if you can afford it.”