Wondering when you should take a mortgage? Read on to get some expert tips and advice.
Here’s what you need to do to make yourself a more attractive borrower:
-Work on your credit score.
-Build your savings and down payment.
-Maintain consistent income.
-Manage overall debt.
-Consider taxes.
-Consider whether homeownership is right for you.
Is Your Credit Score Ready?
In order to qualify for a good home loan at low rates, you need an excellent credit score. Most of the time, lenders use your FICO score to determine how risky it is to lend to you. FICO scores generally range from 300 to 850. Higher scores can help you get the best mortgage offers. Knowing your FICO score should be the first step in shopping for the right home loan.
Can You Demonstrate Stable Income?
The average home loan is 15 or 30 years. This means that your long-term income matters a lot. Lenders are highly likely to consider your current income and look for indications that it’ll continue. Having consistent employment could help you pave the way for approval.
Have You Saved Enough?
Having enough savings is very important to successfully buy and maintain a home.
Prospective homebuyers must have enough savings to make a 20% down payment.
How Is Your Overall Debt?
Lenders will consider all of your debt obligations when approving your home loan. This factor is called your debt-to-income ratio. It measures the total of your monthly debt payments divided by your gross monthly income.
Factor in Taxes
Recent changes to American tax laws mean the cost of financing a home for some people may be higher than it would’ve been in the past. This means that fewer homeowners may have the financial incentive to itemize their deductions on tax returns.
Is Homeownership Right for You?
A mortgage is a huge commitment and shouldn’t be taken lightly. That’s why you should ask a few additional questions before deciding whether it’s a good time to buy a home.
To do this, homeowners must start by considering how long they plan to stay in their new home. If it’s less than five years, one must consider renting instead. If someone is not planning to live in their new home for very long, they might not recover those costs.
