Many consumers have misconceptions about what it takes to qualify for a mortgage.
Knowing key mortgage qualification criteria such as: down payment percentage, credit score, and debt-to-income ratio and getting pre-qualified will take the anxiety out of the mortgage process.
To be sure you’re ready to buy a home-here are five the suggestions.
1. Learn All You Can About Mortgages
Mortgages have changed a lot in recent years as lenders and investors make adjustments reflective of American households. For example, several adults in the household may be working and contributing to the household budget.
Fannie Mae’s HomeReady mortgage lets lenders consider income from other household members when qualifying the borrower. Additionally, some buyers may qualify for zero-down options, including VA loans (guaranteed by the U.S. Department of Veterans Affairs) for veterans, service members, and surviving spouses, and U.S. Department of Agriculture loans for low- to middle-income borrowers in qualifying rural areas.
2. Talk To a Pro
It is wise to contact a mortgage broker months prior to your home search to get pre-qualified. They will go over all of your monthly expense and income and let you know what you qualify for, the different mortgages you are eligible for, etc.
If you don’t know what your credit score is or how to read your credit report?-your mortgage broker can help you. You can pull your credit for free once a year. If there are black marks or credit history issues that need attention and cleaning up-do so prior to applying for a mortgage.
Having a preliminary conversation with your mortgage broker to get pre-qualified is useful. They can pull your credit and tell you how to clean it up so that when you are ready to make an offer on a house-you will have improved credit-which translates into lower mortgage interest rates!
3. Explore Down Payment Assistance
There are dozens of down payment assistance programs and homeowner education options in most areas.Ask your mortgage broker for a list of programs in your area.
4. Compare Mortgage Quotes
Shop around for a mortgage. As large and infrequent as the mortgage transaction is in most people’s financial lives, borrowers may be leaving money on the table by not shopping around and negotiating for the best terms they can get. Getting a better deal can help borrowers sustain their mortgage even in the case of unexpected increases in expenses, or decreases in income.
5. Consider Long-Term Costs
As any home buyer knows, there are costs you can anticipate: your monthly mortgage or homeowners association fees, for example.
There are also unexpected costs like paying for a new roof. It is recommended that homeowners set aside 3-5% of the value of their home every year to use for repairs and improvements. If you tuck that money away you will have it when something goes wrong-or you have a big home expense, such as a new roof, new heating system, etc, you will be prepared.