Q: With mortgage rates as low as they are, I am considering buying a house. Some of the houses I’ve looked at are also expensive. Everyone says it’s a buyer’s market, but how can I determine what I can afford to buy?
– C. Coleman, Hackensack, New Jersey
A: Stop looking — for now, anyway — and get approved. According to Marlon Seenarine, owner of MGN Funding Corp. in White Plains, NY (www.mgnfunding.com), most people go shopping, fall in love with a house, and subsequently, try to get approved for a loan. “Well, if the house you like is $350,000, then you find out you can only be approved for $200,000, you have a problem,” he explains. Getting approved first, he argues, gives you a budget with which to go shopping. It is just like purchasing anything else, before you decide to buy a car, an appliance, or even clothes, you should have an idea of what you are willing to spend before you shop.
Getting approved prior to buying also gives you a bargainer’s edge. “A seller is more likely to settle with someone who is approved, even if you are offering less than the person who is not, because a seller knows that you have a mortgage. The other bidder will still have to go through the process and then [possibly] not get approved.”