Getting started

1. How much can you afford? 

Much of the following will involve a lender

Just like buying a car, you have to figure up a budget if you want to buy a house. Some folks don't think they have a shot at purchasing a home, but with interest rates near historic lows, those that qualified for a $70,000 home years back now may now qualify for something much higher, because even though a family's income might remain unchanged over the years, their purchasing power has actually increased!

Here's why:

Let's assume that a family with an income level of $30,000 per year can afford a mortgage payment of around $400/month, assuming an interest rate of 6.5% on a 30 year loan. This mortgage payment made of these terms is around a $62,500 loan amount. 

Now let's change the interest rate to 4.5%. Because a mortgage payment is made up of interest and principal amounts added together each month, this lower interest rate will allow for the increased affordability of about a $79,000 loan amount - a $16,500 increase in purchasing power!

There is no immediate gratification when it comes to obtaining an approval from a bank to purchase a home, so it's important to think about working towards a mortgage months before you'll actually need it. 

2. Choosing a lender and obtaining a "preapproval"

This part is completely up to the you, the consumer, as far as who to choose. Do you currently have a relationship with a bank, credit union, or savings & loan? Try stopping in and asking for a mortgage or loan specialist. Banks aren't the only institutions that can originate mortgages. There are some companies whose sole business is to originate and find mortgages for clients.

As easy as it seems, many realtors tend to work with specific lenders. Those that are seasoned know the difference between lenders that get the job done, and lenders that don't. Feel free to ask for recommendations from any of our realtors in the Shelbyville, Southern Indiana, or Indianapolis area. 

Because of how much of a process obtaining a mortgage is, one little mistake in the beginning could waste a month or more of your time. So ask questions, be proactive, and follow up as a consumer. A lender will ask for verification of employment, income, assets, and bank account funds needed for closing. Read more in the expectations tab!