Have you purchased your own home? Have you considered purchasing a home? For many people, mortgages can be pretty complicated. Whether it’s a conventional mortgage, or a low-interest mortgage through the USDA or CHFA, here are some tips to think about prior to applying for a mortgage. The good news – if you’re considering applying for a Habitat home, we’ll walk you through the whole process!
· You’ll need a lot of documents! Whether your lender is the bank, USDA, CHFA, they will want to see that you make enough money to pay the bills. Typically, your mortgage payment should not equal more than 30% of your monthly income.
· Pay off as much of your debts as you can! In addition to wanting proof of your income, lenders will look at your debt-to-income ratio. A lower debt-to-income ratio is always preferable, especially when you’re presenting all your finances to potential lenders.
· Develop good credit habits! Don’t miss payments and don’t pay your bills late. All of this goes into your credit history, which influences your credit score. A higher credit score is much more likely to help you qualify for a mortgage.
· Show a solid work history. Your lender wants to know that you’ll be able to make your payments consistently over the life of the loan. You need to show that you’re responsible enough to keep a job and keep up on your payments. A two-year job history without periods of unemployment is generally best.
· While your loan is being considered or being processed, don’t apply for new credit cards, and don’t buy things on credit. This could change your debt-to-income ratio, and not in a good way.
· There are lots of things to budget for – down payments, closing costs, homeowners’ insurance… Make sure to find out what those costs are and budget accordingly!
The homeownership process can be long and stressful, but it’s worthwhile! So take things one step at a time, don’t hesitate to ask for clarification along the way, and enjoy the journey.