How To Finance Your Home

Understand What Type of Mortgage is The Best Fit For You

Depending on your current situation, there are many different loan options you can get when you’re looking to buy your first home. FHA loans are the easiest to qualify for due to the low credit score requirement of only 580. A credit score higher than 580 will allow you to only put 3.5% as a down payment which is much easier to obtain than the 20% required for other loan types. If you have lower than a 580, you still qualify for an FHA with the only difference being you must put 10% down. If your credit score is over 620 you may want to consider a conventional loan, with a conventional you may be eligible to only put 3% down.

For any active duty or former military people, a VA loan offers many people the opportunity to buy a home with no money down as well as get a better interest rate. In the current market, not having any upfront cost can be the difference of getting a home or not with how competitive it is to buy. There are no size fits all when it comes to home buying, and you should shop are different options and different lenders to find out what’s best for you.

How to get pre-qualified for a Home Loan

Getting pre-qualified is a more casual way to see how ready you are financially to purchase a home. While pre-approval is a more involved process that Is best suited for borrowers who are ready and motivated and buy today, pre-qualification will give you a good idea how much a lender may be willing to give you. The first step is to improve your credit score, the better your credit score is the better rate the lender will give you. You may have heard of about debt-to-income ratio or just DTI. I will include a calculator at the bottom of this article but the easy way to figure out your DTI is to divide your monthly debt payments by your monthly income. Lenders prefer borrowers with a DTI lower than 36% or less. You will also need to gather all your financial and personal information, this includes your past tax returns, if you are self-employed, you will need to provide the lender with 2 years of past income tax returns to show you can afford to borrow.

Find Your Dream Home

         With Pre-qualification in hand, you can really start the search for the property that meets your needs. When you find a home that you can see yourself living in and you can afford, you want to be ready to jump. When looking at homes, understand what specific features you would want in your home, this can not only save time when it comes to looking at homes but by being specific, your realtor can narrow down all the properties that match your criteria. Make sure to take into consideration what kind of neighborhood you want to live In, the quality of schools, and what there is to do near your home. But make sure to also look at homes that may be a little different than what you want, many people when looking at homes realize they may want something different.

Close the Deal

            Once you have found your home and your offer has been accepted, now it is time to get your mortgage, provide all the necessary information, and start getting excited because closing will come faster than you expect. Your real estate agent, lender, and closing company will provide you with all the necessary paperwork so you don’t have to stress about making sure all the paperwork is signed. At this point, all the hard work for you is done, before you move in, make sure you move all the utilities into your name and start planning any fixes and renovations (if any) you want to do. Getting all this done early will save a lot of stress and headache after the closing day.

Debt-to-Income Calculator