The Finance Blogger

Another excellent question from one of our readers concerning online mortgage loans! The question was whether a person should wait until they have picked out a home they are interested in purchasing to apply for a mortgage. Or whether they should pre-apply for a mortgage before they have even found a home that they are interested in. This is a common question that many consumers have when they are looking for their first home. They want to know how much they can afford and how big a house that they can afford.

Apply for Online Mortgage Loans

We believe that the answer is and always should be to apply for a mortgage ahead of time. Applying online is an excellent way to find a mortgage and become pre-approved for a mortgage. The reasons are as follows:

• Know how much you can get financing for in advance
• Understand the value of home you can afford
• Make an offer without conditions

These are the three main reasons for requesting mortgage approval ahead of time, whether it is through an online mortgage service or a traditional mortgage service such as a bank. We will explain in a bit more detail.

Know how much you can get financing for in advance

The mortgage you will be approved for is usually based on the income you make each month less and allowance for taxes and living expenses. Some banks will approve as much as 30% of your income to be allocated to a mortgage payment. Property taxes are added to this figure and the maximum most banks will go to is 35%. Consumers should note that this still puts a significant burden on people since it is a large portion of your income each month. Some will include only one working spouse , while others will include both.

The other factor that determines how much you can afford is the interest rate and the term of the mortgage which will provide you with a monthly payment. It is this monthly payment that must not be more than 35%. As interest rates change the approved amount may go up or down depending on the direction interest rates are headed. Many people want to lock in a mortgage when interest rates are low.

Understand the value of home you can afford

Once you have the above figure of how large a mortgage you can afford you are no in a position to decide how much you want to spend. If you have been pre-approved for a $100,000 mortgage and you have $25,000 to put down as a down payment, then homes in the $120k to maybe even as much as $140 k can be considered depending on your negotiating skills. Sellers who are motivated and know that they have an approved buyer may lower the price to get the sale.

The point of this is that you are now in a strong negotiation position to drive the sale to a close at a price that you can afford. Use it to your advantage.

Make an offer without conditions

If you find a house you like and want to make an offer without being pre-approved for a mortgage, most consumers are going to make an offer conditional on finding financing. Sometimes this can take as long as a week. In the mean time another buyer may come along and make a firm offer on the same home. If you cannot remove your conditions, you will lose the opportunity to buy the house you were interested in.

Obviously those consumers with pre-approved mortgages will find it much easier to find a home. They can make a firm offer already knowing that they are approved for a mortgage. Whether it is an online mortgage loan or other wise.

For more information about online mortgages, click here.

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