Let’s face it: a mortgage is not only a popular way to buy a home; it’s the only option many young people have to do that. Lenders do not care much about the fact that you’ve been denied a raise, or that you’ve been renting a house for the past 15 years. The only thing they would like to know is whether you’re financially prepared to pay off mortgage or not. That means everything boils down to your creditworthiness.
Getting approved for a sought-after mortgage plan is not the easiest thing to do, especially if you’re a first-time home buyer. Nevertheless, it is still possible. Take a minute to find out what you should get started with.
Do some calculations
First, shop around and choose the mortgage plan that meets your needs. To facilitate decision-making, you’re better off finding out your gross monthly income. When estimating it, make sure you include all obligations you may have (unsettled debts, loans, credit card payments, etc.). It’s critical to take these into account to not fall into a financial trap down the road.
There are a lot of mortgage calculators intended to help you make accurate estimates. Use them wisely so that both you and your lender can see the bigger picture.
Draw up a mortgage budget and stick to it
Mortgage payments can destroy your budget unless you know how much you can afford before applying for a loan. The good rule of thumb here is that your monthly payments should never exceed 28% of your gross income. Otherwise, you risk being left with nothing.
Determine how much you can afford with reference to how much you make. If you’re a couple, set your total budget and do your best to keep to it. You can also consider plans for young families which can help you with your home purchase.
Save for a down payment
The larger down payment, the lesser amount owed. It does make sense to put 20% down so that you can end up with more budget-friendly monthly payments. Although it’s up to a lender to set minimum upfront costs, they always remain subject to negotiation. Don’t be fooled into paying more than you actually can afford.
Improve your credit score
What mortgage lenders consider on a first-priority basis is your credit score. It’s a numerical expression of how responsible you’ve been when meeting your previous obligations. A credit score is probably the most important factor used to determine your creditworthiness and interest rates.
To give your credit score a much-needed boost, try to pay off all your existing debts and do not take out any new loans. This way, you will demonstrate responsibility and qualify for lower interest rates.
Follow these 4 pieces of advice, and you’ll get one step closer to your dream house!
