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When you’re buying a home, navigating the world of mortgages can feel overwhelming, especially if one lender says you qualify for less than you’d hoped. But here’s the good news: not all lenders are the same, and it’s worth shopping around.

Why Do Lenders Differ?

Each lender has slightly different criteria for qualifications. They may vary in:

Debt-to-Income (DTI) Ratio: Some lenders are more flexible with how much debt you can carry compared to your income.
Credit Score Requirements: While most lenders have similar ranges, some may offer better rates for your specific score.
Fees and Closing Costs: These can vary significantly, impacting your overall budget.
Interest Rates: A small difference in rates can save (or cost) you thousands over the life of your loan.

The 45-Day Rule

When you apply with one lender, you have a 45-day window to shop around with others without further affecting your credit score. Credit bureaus treat all inquiries from mortgage lenders within this period as a single inquiry, typically lowering your score by about five points just once.

How to Compare Lenders

Ask for Fee Sheets: Beyond interest rates, compare fees. A lender offering a great rate might be compensating with higher fees.
Understand Closing Costs: These are generally around 4% of the home’s purchase price (not including the down payment).
Explore First-Time Buyer Programs: If this is your first home, some lenders offer programs with lower down payments or assistance options.

How Much Will Loan Offers Vary?

Lenders won’t vary drastically in what they offer—think $300K from one lender versus $315K from another. However, that extra wiggle room might make all the difference when choosing your dream home.

Keep Taxes and Insurance in Mind

Your monthly payment includes more than just the principal and interest. Property taxes and homeowner’s insurance, which often increase yearly, will also factor in. Ensure your budget has some flexibility for these potential increases and unexpected life changes.

Why Shopping Around Matters

By comparing lenders, you can:

Save money with lower fees and better rates.
Find a lender who understands and accommodates your needs.
Gain confidence in your decision, knowing you’ve explored your options.

The worst situation is overextending your budget to afford a home, only to face financial stress later due to rising costs or life changes. Take the time to shop lenders, understand your budget, and make an informed choice.

If you’re considering a move or investment and require a trusted Real Estate Broker, we’re here to assist you. Contact us via email at TEAM@McDanielCallahan.com, complete the form below, or give us a call at 925-838-4300. We are ready to provide expert guidance and support for all your real estate needs. Terry McDaniel DRE License #00941526

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Embarking on the journey to buy a new home is an exciting and often complex process. Amidst the preparations, it’s crucial to consider financial decisions that can impact your mortgage approval. There is wisdom behind avoiding the temptation of opening new accounts or purchasing new cars when you’re on the path to home ownership.

1. Credit Score Sensitivity:

Opening new credit accounts, whether credit cards or loans, can have a direct impact on your credit score. Lenders closely scrutinize your creditworthiness during the mortgage application process.

Action Steps:
- Delay opening new credit accounts to maintain a stable credit score.
- Focus on paying down existing debts to strengthen your financial profile.

2. Debt-to-Income Ratio Considerations:

Taking on new debt, such as financing a new car, affects your debt-to-income ratio—a critical factor in mortgage approval.

Action Steps:
- Avoid large purchases that increase your monthly debt obligations.
- Maintain or improve your debt-to-income ratio to enhance mortgage approval chances.

3. Unpredictable Impact on Approval:

Lenders assess your financial stability based on a snapshot of your current situation. Introducing new variables can complicate the evaluation.

Action Steps:
- Keep your financial picture consistent during the homebuying process.
- Minimize significant changes that may raise questions about your financial stability.

4. Focus on Financial Stability:

The period leading up to a home purchase is an ideal time to prioritize financial stability.

Action Steps:
- Create a budget and stick to it.
- Allocate funds towards saving for a down payment and closing costs.
- Delay major financial decisions until after securing your mortgage.

While the allure of new accounts or a shiny new car may be tempting, exercising restraint during the home buying process is a strategic move. By avoiding financial changes, you enhance your creditworthiness, improve debt ratios, and present a stable financial profile to lenders. Remember, the goal is not only to secure a mortgage but also to set the stage for a financially sound home ownership journey.

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