There are a lot of important factors to consider when buying a house, but budget may be the most important. What you can afford, also known as your purchase power, can make a huge difference in which houses you can realistically consider. We spoke with Mortgage Specialist Sean Dunn from our Bend, Oregon branch to learn more about how buyers can maximize their purchase power and set themselves up for success.
Considering Purchase Power
If you’ve spent any time looking at real estate listings, you know that cost can make a huge difference in the home you end up buying. The more you have to spend, the more control you generally have over where you live and what kind of house you get. That’s why purchase power is so important. In many ways, purchase power determines how much freedom of choice you have as you look for your next home.
Purchase power doesn’t always mean that you need a huge budget to get the house you want. According to Mortgage Specialist Sean Dunn, even a $10,000 difference in purchase power can make a buyer’s options better. He cites as an example a client who recently bought a home for $290,000. If that client’s purchase power had been even $10,000 less, the options they’d have to consider in that local real estate market would have been much different.
What Determines Purchase Power?
So what factors come together to define your purchase power? It’s a number of things, according to Sean. It’s important to take advantage of good interest rates, but your personal financial health also matters quite a lot.
“Credit score is huge! I just helped a client pay off a $253 credit card balance, which raised their credit score by 7 points. That saved them .5% on their interest rate and changed the entire structure of their loan,” Sean says. By making that extra interest rate savings, Sean’s client was able to enhance their purchase power for a more valuable home.
Debt doesn’t just impact your credit score. It can also limit how much you can spend on housing every month, and that monthly budget does play into the approval process. Even just $50 per month in extra budget can make the difference between qualifying for a house or not.
How Purchase Power Impacts Your Finances
Buying a house isn’t just about finding a place to live where you don’t have to deal with an inattentive landlord and raising rent prices. It’s also a major investment. That’s why it’s so important to dig into your purchase power early in the buying process. If you can afford to buy a nicer house in an up-and-coming neighborhood, that could mean a brighter financial future than you’d have if you bought a cheaper house in an area that’s past its prime.
This is why Sean advises would-be homebuyers to have conversations not only with experienced local realtors but also local mortgage advisors. It’s never too early to start the conversation, either.
“I love getting to meet with clients before they’re ready to actually buy,” Sean says. The complexities of the mortgage process often mean that clients, even those who’ve bought homes before, don’t always know which financial decisions will set them up to maximize their purchase power and ensure future financial health. Even visiting with your local mortgage specialist a year in advance can be helpful. Getting one-on-one coaching from an industry expert will make the buying process much easier, and the more time you have to prepare, the better your financial results will be.
Meeting With a Mortgage Specialist
When you meet with a mortgage specialist before even beginning to look at houses, you create a game plan to set yourself up for success. Not only that, but the local mortgage specialists at Directors Mortgage will also put you in touch with expert realtors with proven track record. That professional perspective can also have a huge impact on your buying experience.
Ultimately, starting the conversation is what matters. Our mortgage specialists are here to help, and they love sharing their knowledge. Talking to a mortgage specialist is free, Sean notes, and “we don’t bite. Spending just an hour with a mortgage specialist could change the future trajectory of your financial health for the rest of your life!”
Sean’s closing advice: remember that “the mortgage industry looks at debt-to-income ratios differently than most other financial industries,” and the financial self-improvement plans buyers come up with on their own often miss the mark. “Whether it’s paying off a car loan or putting money in savings, talk with a mortgage specialist before you make high-dollar financial decisions. That way, you can be confident that your decision will result in greater purchase power.”