Some people that don’t think they can buy, really can. Some people that think they don’t have any problems, really do. And just about everybody is wrong about what they can really afford. Some real estate agents have the resources to give you a good idea of what you can do. Others may match you with a loan officer (either option is fine). If you are concerned that you may have a problem, it’s not a bad idea to go to a loan officer first, but in most cases, a good real estate agent can direct you towards a loan officer that suits your particular needs.

When you are giving information to either your real estate agent or loan officer, it is important that the information is accurate and complete. Don’t be embarrassed about anything or keep secrets from your agent. Whatever problem you have will come out anyway, and probably at a time when it will be much harder to deal with the problem.

You will need to provide your monthly income, monthly debts and the total amount of cash you will be using towards the purchase. If you get paid weekly or bi-weekly, you can determine your monthly income by multiplying your gross pay (before taxes) by 52 (weekly) or 26 (bi-weekly). Then divide that number by 12. If you just multiply your weekly check by 4, it will appear like you can’t afford as much as you really can.

For your monthly debts, count personal loans, student loans, medical bills that you are making payments on, car payments and the minimum monthly payments on credit cards (including department stores, jewelry stores, etc.). If a debt will paid shortly after settlement, you may not have to count it. Alimony and child support counts as a debt if you are paying it, and income if you will be receiving it for a long enough period after settlement.

Debts do not include your current rent (because you won’t be paying that any more), utilities (that’s taken into account on the new home) or insurance. If you don’t pay your insurance, it will be cancelled, but that will not affect your credit. Make sure you ask your loan officer to specifically clarify which debts you will have to count.

Different types of loans have different cash requirements. Often, a little more cash will substantially increase your purchasing power. If you need more cash in order to buy a more expensive home, consider selling stocks and bonds (your baseball card collection) or getting a gift from a close relative. If you get a gift, don’t take the money until after you’ve consulted with your loan officer. If you do it the wrong way, you may not be able to use it. Finally, in some circumstances, you may be able to get a contribution from the seller. If it’s done right, a seller contribution can get you into a nicer house without costing the seller a penny (so they’ll agree to do it).

Financing Options and Types of Loans

The Loan Process

Financing Vocabulary