Congratulations!!! You are ready to buy a new home!
It is a most exciting time in your life, but also one that can be quite scary! You are about to make one of the biggest investments and commitments of your life!
Since most of us do not have a large enough savings to bankroll the purchase of a home, you are going to spend some time shopping for a mortgage that will best suit your needs.
And you will want to evaluate your eligibility, and make some improvements if needed.
The best way to see how much of a mortgage you can afford (and a way to do it without spending anything!) is to prequalify! A lender will take your income, expenses, and credit score to give you a true picture of what you can realistically afford for a mortgage, and that is the letter you give to lenders to show that you are ready to finance! (It will also help give you a better idea of a price range for the home that you can afford.)
If your credit score falls below 620, it would be a good idea to take some time to try to improve your score - in that the better your score, your chances of getting a lower rate mortgage greatly improve - thus lowering your monthly payments.
You also should show a DTI (debt to income ratio) lower than 36%. (How can you lower it if it is higher than 36%?) Can you pay off a credit card, or make bigger payments on a car payment to get it paid off sooner? Any way you can reduce your monthly debt will help lower your DTI!
Shopping lenders can also make a big difference. Mortgage originators can be a bank, a mortgage banker, or a mortgage broker. Banks use traditional funding, but mortgage brokers may be able to be more creative in getting you a loan that might meet your needs. You may wish to use a loan organization that caters to first time buyers. There are also special programs that you might qualify for, such as FHA, USDA, or VA loans. FHA loans help those who do not meet the conventional standards and insures the 20% down payment. Looking for a home in a rural area - a USDA loan might be what is needed. Are you a veteran? A VA loan does not require any money down. Which is a huge help to our service people who may not have the down payment accumulated.
Consider these ways to get started in the process. Don’t let the unknown intimidate you!
Contact me today and I can assist you in navigating this exciting process.
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