Please reach us at hazelarroyou@gmail.com if you cannot find an answer to your question.
1. Your credit score
This three-digit number can make or break your ability to get a mortgage and will affect what interest rates you can qualify for. Learning your credit score gives you an idea of where you'll stand with lenders and whether it makes sense to work on strengthening your credit before applying for a mortgage. Higher credit scores help you qualify for lower interest rates.
2. How much home you can afford
It's a good idea to keep housing expenses to no more than 28% of your monthly gross income. That means monthly payments for your mortgage, property taxes, and homeowners insurance should not exceed that threshold.
You'll also want to consider your total debt-to-income ratio, or DTI, when determining how much house you can afford. Your DTI is the portion of your monthly gross income that goes toward monthly debt obligations — including housing costs — plus car, student loan, credit card and other debt payments. A good DTI for qualifying for a mortgage is 36% or below. Lower is better for being able to budget for things like emergency expenses, and for comparison shopping for a home loan.
3. Options for your down payment
The down payment is the upfront cash you pay toward the home purchase. Lenders offer a variety of mortgages with different down payment requirements. Many states and some counties and cities offer programs that combine mortgages with low interest rates with down payment assistance and help with closing costs. Explore your options to decide how much you'll need to save for a down payment.
4. How much you can borrow
Before you start looking at homes, apply for mortgage pre approval with at least a few lenders. A preapproval letter is a lender's offer to loan you a certain amount under specific terms. Compare the offers to get the lowest rates and fees. https://www.mortgagecalculator.org
5. Condition of your local real estate market
Browse listing websites and check market reports from your local real estate agencies to learn about home prices, demand for homes and inventory of properties for sale. This will give you an idea of what prices are for homes in your area and how much competition you'll face when making offers to sellers.
6. Where you want to live
Every city has distinct neighborhoods with their own personalities. How you want to live will determine where you'd like to live. How far are you willing to commute to work? What types of amenities do you want nearby? Do you want a bustling neighborhood with restaurants within walking distance or a quiet suburban area?
7. Type of home you want
A detached, single-family home isn't the only option. Condominiums, townhomes and manufactured homes can be more affordable. Consider your budget and lifestyle to decide what kind of home is right for you.
10 Things to Avoid Before Applying for a Mortgage. As a homebuyer, you don’t want anything to jeopardize your chances of closing on the home you’ve selected. Many folks can’t buy homes without applying for a mortgage, and if you need one, it’s important to prepare so you’re a good candidate to get a loan. Making any of the following mistakes could reduce the amount of financing you qualify for, result in a higher interest rate on your mortgage or cause a lender to reject your mortgage application. And if you want further expert financial guidance, consider working with a financial advisor who can tailor advice to your specific needs.
1. Racking up Debt
Taking on additional debt before applying for a mortgage doesn’t make much sense. Your debt to income ratio – or how much debt you’re paying off each month in comparison to how much money you’re making – is just one factor that lenders look at when reviewing your mortgage application. If it’s above a certain threshold (typically 43%), you’ll be considered a risky borrower.
2. Forgetting to Check Your Credit
Your credit score says a lot about you. It lets a lender know whether you’re fiscally responsible and indicates the likelihood that you’ll be able to pay off your debts in the future. Since it’s often one of the criteria that lenders use when approving homebuyers for mortgages, it’s a good idea to check your score before filling out an application for a home loan.
3. Falling Behind on Bills
Since credit scores matter to lenders, it’s best to work on improving your score and protecting it before you try to get a mortgage. That means that you don’t want to do anything that could potentially hurt your score, like missing bill payment deadlines.
Many lenders use the FICO scoring model, and submitting just one check after the due date can knock quite a few points off your credit score. If history shows that you can’t pay your bills on time, your lender will likely assume that you’ll make late mortgage payments too.
4. Maxing out Credit Cards
Exceeding your credit card limit or swiping your card too often will hurt your credit score as well. One thing that affects your score is your credit utilization ratio (or your debt-to-credit ratio). That’s the amount of credit you’ve used relative to your credit line. For example, if you’ve charged $5,000 to a credit card and you have an $8,000 credit limit, your debt-to-credit ratio is 62.5%.
Ideally, that ratio shouldn’t rise above 30%. And if you’re in the market for a new home, it’s important to keep it as low as possible.
5. Closing a Credit Card Account
If you’re mired in credit card debt, you might think that closing an account will improve your credit score. But that’s not necessarily true.
There are certain situations where shutting down a credit card account might be a smart move. If you need a mortgage, however, it won’t do you any good. By getting rid of a credit card and reducing your level of available credit, your debt-to-credit ratio could skyrocket. And as a result, your credit score could sink.
6. Switching Jobs
Making a career change weeks before meeting with a lender might hurt your chances of qualifying for a mortgage. A lender is going to want to make sure you have a stable source of income and you can afford to pay a mortgage bill every month. If you start a new gig right before you begin your mortgage application, you might not even have a pay stub to show your lender how much you’ll be bringing home going forward.
7. Making a Major Purchase
Buying something big – like new appliances or a new car – could lead a lender to reject your mortgage application. You’ll need to have a lot of cash on hand when you’re buying a house so that you can pay for your down payment, closing costs and insurance. What’s more, if you have to take out a loan or swipe a credit card to make that purchase, that could affect your credit score if you can’t pay the bill in full on time or your debt-to-credit ratio rises.
If you’re tired of renting and you’re ready to buy a house, it’s best to try and reduce your financial obligations before applying for a mortgage.
8. Marrying Someone With Bad Credit
It’s not uncommon for couples to buy homes after tying the knot. Keep in mind, however, that if you’re getting the house together, both of your credit scores and financial histories could be taken into account. If you’re marrying someone whose credit isn’t in tip top shape, it might be a good idea to work on improving his or her score (and paying off the wedding loan or extra debt you both took on) before trying to get a home loan.
9. Co-Signing on a Loan
It’s important to think carefully before agreeing to cosign a loan for a child in college or another family member, particularly if you’re trying to become a homeowner. By co-signing, you become partially responsible for that debt. If the borrower can’t keep up with payments and defaults, your credit score could dip substantially.
10. Making Big Deposits
Your relatives can help you pay for your down payment. But there are rules that go along with down payment gifts. You can’t deposit the money into your account without properly documenting it.
Generally, making a large deposit into your bank account prior to visiting a mortgage lender won’t look good. Lenders normally want to see that you have plenty of money in your account that’s been there for at least two months.
Bottom Line
If you can’t buy a house without getting a mortgage, it’s in your best interest to avoid any moves that could prevent you from qualifying for one. The main thing is to not do – or fail to do – anything that might raise a red flag for an underwriter seeking to determine whether you are a worthwhile risk.
Tips on Getting a Mortgage
We use cookies to analyze website traffic and optimize your website experience. By accepting our use of cookies, your data will be aggregated with all other user data.