Buying Your Mason City Home
One thing to consider when buying a home in Mason City is: How much can you afford?
We recommend you consult a mortgage professional to help you discover what price range fits your individual financial circumstances.
And your realtor may need you to have your mortgage pre-approved to avoid spending their time and yours looking at houses that may be out of your reach.
How do I get started?
While you might be tempted to dive into the real estate listings right away, it will save you time and potential frustration if you have a talk with your lender first. That way you won't spend hundreds of hours searching, only to find you weren't able to qualify for the home you want.
Your lender will perform a simple verbal pre-qualification in just a few minutes and follow with a full pre-qualification in a few days.
Making sure you qualify for the amount of money you can afford will help you focus your search on the homes in your price range, saving you a lot of time and frustration. And it can give you an edge when competing with other offers on the home you want.
For instance, if a seller is deciding between two offers -- yours, which has been qualified, and another unqualified offer -- they are much more likely to pick yours because they know you're ready and able to come to an agreement.
In addition, pre-qualification gives you leverage when negotiating with a seller in a non-competitive atmosphere because it essentially makes you a cash buyer.
The amount of home you qualify for will be determined by three key factors:
- Your down payment;
- Your ability to qualify for a mortgage, and;
- Closing costs.
Down Payment
If you already own a home, you can rely on equity from the sale of that home. But if you're a first time homebuyer, you're likely limited to the money you've been able to save.
While the days of having to put 20 percent down on a home are in the past, putting a large amount of money down will make it easier to qualify for a mortgage and to get the lowest interest rates available. With recent changes in rules and regulations for home mortgages, check with your Mortgage Broker to find out how much you should plan on putting down on your new home.
Qualifying for the Mortgage
Lenders consider two basic factors to determine what size mortgage you are eligible for:
- Your monthly mortgage payment of principal, interest, taxes and insurance (PITI) should not exceed 25 to 28% of your monthly gross income, and;
- Your monthly housing cost (PITI) plus other long-term debt should not exceed 33 to 38% of your monthly gross income.
And most lenders will consider 4 key factors to determine your ability to qualify for a home loan:
- Income -- Can include your gross monthly income, secondary income (commissions, bonuses) and history of employment, stability of income, education, and potential for future earnings;
- Credit History -- History of debt repayment, total outstanding debt, highest balance, and your highest monthly debt balance;
- Assets -- Your assets consist of cash on hand, savings and checking accounts, CDs, stocks, bonds or any other type of liquid asset;
- Property -- The home you are planning to purchase will be appraised to determine the market value. The estimated value must be sufficient to secure the loan. Lenders will loan you no more than a certain percentage (usually 95%) of this value.
Closing Costs
In addition to your down payment, you will also pay for fees for the loan and closing costs. Payment will be required at the time of closing unless you qualify and choose to have these included in your financing.
Closing Costs generally will range between 2 percent and 6 percent of the mortgage loan, depending on the loan and lender. You will be provided with a "Good Faith Estimate" of closing costs so you will know what to expect.
"Points" -- one-time charges equal to one percent of your loan amount -- may be required by your lender at closing.
Your closing agent will charge a fee at the close of the sale.
If you have questions about real estate mortgages and financing, please call us at (641) 424-6705 or contact us with your real estate questions today!
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