Buying a home is one of the most exciting experiences of most peoples’ lives. However, it can also be one of the most stressful and confusing experiences if you aren’t prepared. If you’re planning to purchase a home in the next few months, here are five factors you should be aware of when applying for a home loan.Verify your mortgage eligibility (Aug 12th, 2022)
1. Your Credit Score
Never apply for a home loan unless you know your credit score. If you haven’t checked your score in years, you could be in for a big surprise if you’re turned down for a loan because your score is too low. If your score is in the 600s, you can probably apply for some home loans. However, you may not get the best interest rates. Strive for a score in the mid-700s for the greatest likelihood of getting approved for a low-interest home loan.
2. Monetary GiftsVerify your mortgage eligibility (Aug 12th, 2022)
If someone you love is giving you a money gift to be used toward your down payment on your home, make sure the gift is clearly documented. Otherwise, banks could easily interpret it as an unofficial loan that increases your debt. If your parents or any other generous donors give large sums of money to you as a gift, make sure there’s a signed paper trailed verifying that it’s not a loan.
3. Existing Debt
One of the primary factors banks take into account when considering whether to approve you for a home loan is how much debt you have. Specifically, they look at your debt-to-income ratio (DTI) to figure out if you have a healthy balance between debt and income. You can improve your DTI by coming credit card balances low (below 50%) and refraining from opening additional credit accounts while you’re trying to get approved for a loan.Verify your mortgage eligibility (Aug 12th, 2022)
4. Home Size
If the home you’re trying to buy is too expensive for you to realistically handle, your chances of approval are slim. Before selecting a home for your family, make sure you have plenty of money to pay for closing costs, the down payment, and all running expenses associated with living in the house. If you can’t meet these costs, it’s time to look for a smaller home or start shopping in a more affordable area.
5. Down Payment
If you can put a large down payment on your home, you’ll have a greater chance of being approved. Even better, you’ll have a lower total loan amount and will have an easier time paying off your loan quickly.Show me today's rates (Aug 12th, 2022)