Getting a firm grip on the numbers is the first thing a home buyer needs to do when undertaking the “search/find/buy” process. Until you know and understand what you can comfortably afford, there’s really no point in going out to seriously look at anything.
The gist of this tip is to avoid the “do-it-yourself” approach to financing. In other words, don’t rely on online calculators to estimate how much you can afford. Lenders today are picky and will personally review your application in far more detail than anything you might find online. Your employment history, assets, debt-load and credit score all weigh heavily on what you will qualify for and what kind of rate you will get.
I require all my buyers to at least make a telephone call and run the numbers with a a local lender who has an established reputation before seriously engaging in their home search. To be blunt, your Aunt Betty in Cleveland or the guy that lives in your apartment building just won’t cut it with me (unless I know him and his track record).
I’m also extremely leery of anyone you find on the internet and qualify with by phone. A friend of mind with a small investment property was looking to refi and called the online phone number of a nationally known, very large bank. The guy who answered ran the numbers for him and quoted him an owner-occupied fixed rate for an amount the home’s rent couldn’t possibly support. To help him out, I gave him the name of a local contact with the same bank and told him to recheck the numbers. I also gave him the name of a good San Francisco mortgage broker so he could compare rates.
Other mistakes first-time buyers make: Not factoring in the full monthly cost of the home, including property taxes and insurance; and not understanding all the closing costs involved at the end of the purchase. They also don’t always understand the tasty tax advantages– which can make their net monthly housing cost hundreds or even thousands of dollars less.
If you need a recommendation for lender, let me know. I have several wonderful (local!) brokers that I know and trust.