Purchasing a home is a big step towards investing in your future. Most individuals cannot own a home without the help of a mortgage loan. Qualifying for a mortgage loan and the resulting interest depends on how a bank perceives your ability to pay it back. Read below to see what matters most for qualifying and lowering your mortgage payments.
What Matters Most When Getting Your First Mortgage: Your Income and Net Worth
A high net worth increases your chances of getting favorable loan terms. Net worth accounts for all your current loans, income, and savings. A lender wants to know how you will cover the cost of the loan if things go south. You likewise need to have a low debt-to-income ratio. The more debt you carry, the more it will affect your qualifications. No matter how much you earn, it is wise to keep your monthly debt payments less than 36% of your monthly net income.
Your Credit Score
Your credit score determines whether you qualify for a mortgage and the resulting interest rates a lender will offer you. The higher your credit score is, the lower your interest rates and mortgage payments will be. An FHA loan is insured by the Federal Housing Administration and is issued by an FHA-approved lender. With a minimum credit score of 580, you can qualify for an FHA loan with a low down payment. Take actions to improve your credit score or secure a bigger down payment to ensure mortgage loan approval and low interest rates.
What Matters Most When Getting Your First Mortgage: Your Savings Plan
Banks and lenders do not give out loans to people they don’t trust. It is critical for you to develop a savings plan, just in case the worst thing that could happen, does. If your budget doesn’t have a savings category, make one. Take the time to build up your savings to help you offer a bigger down payment. A bigger down payment will lower the cost of your mortgage payments. Long term it is also important you set aside money each month to pull from in case there is a month where you cannot make your typical payment.
Purchasing a home is stressful and exciting. A home is one of the biggest purchases you will ever make. It is also a huge investment that can have high equity returns. Knowing what matters most will help you purchase the home you want at the right price.
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Steelbridge Realty LLC is a Licensed Real Estate Brokerage that utilizes cutting-edge marketing techniques and data-driven Real Estate solutions in today’s ever-changing environment. Our group of professionals have decades of experience and have navigated through many business cycles. Our diverse background gives us the tools to guide people towards successful decisions.