Buying Your First Home? 3 Steps To Take Before The MortgageSep 19 2012
By: Nicole Gates
Deciding to buy your first home is an exciting, but intimidating step in life. You may have a lot of questions and not sure who can answer them for you. Here are a few things you should consider before making the plunge into buying your first home:
1. Pay Debt Off First
It’s very tempting to ignore your credit card payments to save up cash towards a down payment to your home. However, you should try to eliminate as much debt as possible before starting to save for a down payment. How come? First of all, credit card debt can become very expensive thanks to interest rates, limiting your ability to save money towards your home. Secondly, any existing debt you have when applying for a mortgage can limit how much you can borrow.
Want to learn more about your debt ratio? Check out it out here.
2. Figure Out How Much You Can Afford
How much home you can afford is usually answered by figuring out the following: how much you can borrow and how much down payment you can muster up. Also, keep in mind that the general rule of thumb is that your annual mortgage payment, taxes and homeowner’s insurance shouldn’t exceed 28% of your gross income. And always make sure when saving for a down payment, you leave yourself enough cash to pay off any closing costs.
Check out our calculator to see exactly what you can afford.
3. Check Your Credit
As we mentioned above, your debt can affect your loan options. Make sure you check your credit score to see where you stand. However, if you’re credit score isn’t perfect, you may still be able to get approved for a mortgage with competitive rates. Ask your lender if they offer any loans for slightly marred credit. Also, you may want to consider a FHA loan, which is a government-insured loan that allows more leniencies with borrower’s credit scores.
Want to know your options? Our loan officers would be happy to help you.
For even more information about preparing for a mortgage, check out our FREE eBook, Demystifying the Mortgage Process. It explains mortgage preparation and more in plain English!