Getting pre-qualified for a loan is one of the first steps in the search for a home.
According to Steve Prince, President of Team One Lending, shoppers usually ask the wrong questions. "Many people start by asking me what they can qualify for. What they should be asking is, what can I afford?"
An eager mortgage broker can get you qualified for pretty much anything. The question is, can you afford it? Banks have guidelines on what you can afford based on your income and debt. These guidelines rarely tell the whole financial picture of your life. They also don't know what your long term plans are. If you rely on a bank or lender to determine what you can afford, you may end up with a monthly payment you can't handle.
Today's sophisticated financial products can get a buyer in trouble quickly. Stated Income Loans, Interest Only Loans and Zero Down Financing have been blamed for the recent wave of foreclosures. These products were not designed to fail, but bad practices on the part of brokers put people into them that didn't belong there. They are all designed to work for very specific types of purchases, and are not right for everybody.
Steve suggests that you sit down with a mortgage consultant and thoroughly go over your finances, your long term plans, and come up with a payment you can afford. Then you can find the loan that best suits your needs.