Real Estate Finance

The ability to borrow money is critical in purchasing a Santa Rosa home, land, vineyard or any kind of real estate in Sonoma County. Simply put, if you are not able to borrow most of the cost of the home, you will not become a home owner. So, before you even start to look at Wine Country Property you should:

Be prepared.

Save as much as you possibly can. Make a plan to put a certain amount in the bank every payday. If your employer has an automatic savings deductions plan, take advantage of it. It's much easier to save what you dont see. Cut down on expenses and tighten your belt. Roughly the difference between the cost of the house you want and the amount you can borrow, plus closing costs, is what you have to come up with in cash. The more cash you have, the more house you can qualify for.

Keep your job. Mortgage companies like stability and need to be assured you will be able to keep up the payments. Try to avoid changing employment and, if you are considering becoming self-employed, wait until after you own your own home to make the change.

Pay off debt. Get rid of as much debt as you can, especially credit card debt. The less you have in monthly expenses, the easier it is to qualify for a loan.

Avoid new debt. Hold off on buying a new car or any purchase you must finance. Buy your home first. It is an investment that will appreciate and make you money. Consumer goods do nothing but lose value and the monthly payment reduces what you can afford in a mortgage payment.

Know what you can afford.

Look at your monthly expenses and income. What percentage of your net income is available for housing expenses? There are some general debt to income ratios mortgage companies use in evaluating your loan application. You should become familiar with them. Above and beyond the lender's criteria, you need to carefully consider what you will actually be able to afford consistently on a long term basis. Be realistic, be conservative, and consider unexpected expenses and events.

Do the math on what your mortgage and related home owner expense will be.
The mortgage calculator on the right should be helpful.

Get approved.

Obtain a mortgage lenders pre-qualification or pre-approval letter. This is a letter stating either that you are pre-qualified or pre-approved with the lender for a mortgage of up to the amount stated in the letter.

There is a distinct difference between the two types of letters:

A pre-qualification letter says, in effect, that you have applied for a loan and, if all of the information you have provided or will provide is verified and if the home appraises for enough value, the lender will lend you that amount.

A pre-approval letter says that you have applied for a loan and all of the information you have provided has been verified. The lender commits to lending you the amount stated subject to an acceptable appraisal on the house. A pre-approval letter is stronger, however, either one will prove very helpful.

Your pre-qualification or pre-approval letter is important for two reasons:

1. You will know in advance how much you are able to borrow. Not that you should necessarily borrow to your limit, but you need to know how high you can go. It is important to know up front what the realities are. Often buyers are pleasantly surprised to learn that they can afford more house that they thought they could.

Knowing in advance that you do qualify for a loan takes one uncertainty out of the home buying process.

Knowing how much you can borrow helps you focus on a particular price range and avoid disappointment and embarrassment.

2. You will be a much more attractive buyer. When a seller receives an offer to purchase his home, he considers all aspects of the offer. The price, of course, is important, but also important are factors which indicate that the buyer is able to complete the transaction. One very important factor is the buyers ability to qualify for a mortgage.

A pre-qualification letter makes you a stronger buyer and, all things being equal, will make it more likely that your offer to purchase will be accepted over another buyer who is not pre-qualified.

There is a lot to know about real estate financing. Below are links to pages that will help you understand this important piece of buying Sonoma County Real Estate.