With so many factors that go into securing your mortgage and having your offer accepted, it’s no surprise that there are plenty of differing opinions and hot takes out there about the homebuying process. In this blog, we’ll be sharing some of our homebuying hot takes to challenge conventional wisdom and offer some fresh perspective on what you might already believe.
What You Qualify For Isn’t Necessarily What You Can Afford
Getting pre-approved is incredibly exciting. That dollar amount that you see is usually what buyers will set their expectations for when starting to shop for homes. But don’t be fooled—what you qualify for probably isn’t exactly what you can afford.
When I was a new loan officer, the scariest thing a client could ask me was, “how much can I qualify for?” This is because they didn’t know what payment worked for their monthly budget. We’ve talked about this before, but when you’re buying a home, you should focus primarily on the monthly payment rather than the sticker price of a home.
The rule of thumb I typically tell my clients is to start with what they’re currently paying in rent. Multiply that payment by 125 to get your target loan amount. Finally, add the amount of your expected down payment to get an estimated sales price.
Alternatively, you can take your pre-tax monthly income, divide it by 3, and use that as your target mortgage payment. Then, follow the same calculations in the paragraph above to get a target sales price.
Sure, there are people who pay more than this and make it work. But it’s important to know what you’re comfortable with paying and for that payment to fit your lifestyle and budget. Don’t rely solely on what you qualify for; focus on what works for you in the long run. After all, that monthly mortgage payment is what’ll be coming out of your bank account, not the home’s sticker price.
Why Do You Want to Buy a Home?
There’s no shortage of fear, uncertainty, and doubt out there about rates and the housing market. It’s easy to feel paralyzed because you don’t want to make the wrong decision, and that’s totally understandable.
The reality is that buying a home is one of the most significant investments you’ll ever make, and one that can change your life forever. That’s why, before you start the process, you need to ask yourself why you’re buying a home.
When you ask yourself this question, remember that buying a home isn’t about timing the market or trying to make a quick profit. It’s about creating a stable financial foundation, building equity, and enjoying the pride of homeownership.
So, before you let those headlines scare you away, take a step back and remind yourself why you want to buy a home in the first place. Don’t let the noise drown out the sound of opportunity knocking at your door!
Your Pre-Approval Won’t Tank Your Credit Score
If you think that getting pre-approved will tank your credit score, I’ve got good news for you. According to FICO, a hard credit inquiry from a lender—which is what happens when you get a pre-approval—will decrease your credit score by five points or less.
Better yet, if you have a strong credit history and no other credit issues, you may find that your score will drop even less than that. This drop is temporary, too. So long as everything else in your credit history remains positive, your score will bounce right back up within a couple months.
So, if the fear of a potential credit score drop is preventing you from becoming a homeowner, fear no more! As long as you have a positive credit history, your pre-approval won’t do much to hurt your score.
As I always say, buying a home is a hugely rewarding process that will benefit you and your family for years to come. Don’t let misinformation prevent you from accessing generational wealth! If you have any additional questions about the homebuying process, feel free to reach out to a member of my team!