If you’re in a buyer or seller’s market, you’ll find it hard to not to buy once you see your dream house. But however, it’s not that simple. There are many financial issues to consider, it determines whether you’ll be able to purchase it and afford it afterwards or not also including the terms of your mortgage. Knowing these little details will provide you with insights so that you can make better decisions and will make your mortgage approval process run smoothly. Get more information from the Ponte Vedra Real Estate Agents to stay updated on details of buying your dream home.
- Save A Down-payment
Mortgage lenders prefer the way that you show the commitment to the home you want to buy. Usually lenders typically ask for a 20% down payment, but your down payment might be as low as 3.5% or less if you apply for a government-backed loan. If you are thinking about a $200,000 home with a conventional loan, you’ll need a down payment around $40,000. But if you go with an FHA lender, you are going to need only around$7000. The trade-off of making a lower down payment is that you’ll carry a larger loan balance, which results in a higher monthly payment. You’ll also be required to carry mortgage insurance, which will also add to the amount of your monthly payment.
- Keeping Credit Score High And Accurate
The lender will want to know if you will be able to make your monthly mortgage payments or not if he is thinking about giving you the mortgage loan. Your determination in replaying your debts is shown in how you have maintained your debt obligations in the past days. He will go through your credit report to see how you have maintained it. So keeping a good and accurate credit report score is very important before you apply for the loan.
- Debt Controlling
It is very important to pay down your debts regularly before applying for the loan, it can ease up the process. The more debt you carry, the less home you can buy. Lenders will add your housing expenses with your long-term debt meaning any debts you carry for over 11 months, to come up with another qualifying ratio. Depending on whether you’re applying for a conventional or government-backed loan, these ratios range from around 33 to 41 percent, so if you’re carrying significant long-term debt, it can reduce the amount of mortgage debt you can qualify for.
- Income Demonstration
To make your loan lender happy, you need to demonstrate sufficient income to them. Each lender has his own standards but most of them use a formula to determine a qualifying ratio that you must achieve before they will make the loan. Qualifying ratios typically range from 26 to 29 percent of your gross monthly income, depending on whether you’re going for a conventional or government-backed loan.
- Insurance And Taxes
It is obvious that you would want to insure your home against disaster and major damages, but lenders and bankers do the same against you. Adding your homeowners insurance to a plan you already have in place is a good idea, it can be paid as part of the mortgage payment.
- Financial Documentation
Keeping proper financial documentation is very important. Insufficient documentation can delay or even stop the loan-approving process. Your lender should support you with a complete checklist of required documentation depending on your job and income. Make sure to ask for all documentation for the process if you are starting with a pre-approval., because the pre-approval process means nothing without proper documentation.
The bottom line is, you need to be sure that all of your finances are in order before buying your dream home and also keep in mind to prepare your documents thoroughly before the mortgage-approval process. Have a good day.