Locking down a mortgage is one of the biggest steps toward your dreams of homeownership. There are many factors that influence your chances of securing a home loan at the best rate possible. Curious to know what you can do to put yourself in the best shape to qualify for a mortgage? Check out our tips on how to secure a mortgage for your home purchase.
Good Credit Score - Your credit score is an important factor in securing any loan since it tells lenders how likely you are to stay on track with your payments. The higher your score, the better your chance of securing a home loan with a low interest rate. If you’re not sure what your score is, check with your bank or credit card company. There are also plenty of third-party websites that offer the chance to check your credit score for a fee. If your credit score is low, it’s a good idea to take some time to build up your credit before applying for a mortgage. Your lender can also help you identify potential loan options that accept lower scores.
Stable Income and Employment - When you apply for a mortgage, your lender will examine your income and employment history. You’ll usually be asked to outline your current and previous employers, as well as provide check stubs for the past two or three months. Stable income and steady employment records reassure your lender that you’re a safe bet for a home loan. If you’re self-employed, you may need to provide additional employment and income information. Talk to your lender about their particular requirements.
Sufficient Down Payment - Providing a solid down payment when purchasing your home is a plus. Many lenders recommend putting at least 20% down when buying a home. This percentage isn’t a requirement, but it’s a good benchmark to help you decide how much you’d like to finance on your home. This estimate also depends on the type of mortgage you decide to take out since some loans require a smaller down payment. Explore your options with your lender to determine how much you should put toward a down payment.
Low Debt-to-Income Ratio - Your debt-to-income ratio shows all of your debt, including student loans, car loans, and credit card debt, weighted against your income. Your lender will review your credit history once you apply for a mortgage, which will help them analyze this ratio. The less debt that appears on your credit history, the better position you will be in to secure your mortgage. If your debt is high, consider paying down credit card amounts or other loans to put yourself in better shape to finance your home.
We hope these tips help you on the way to financing the home of your dreams. Have questions about buying a home? Check out our Austin Home Buyer’s Guide or contact us to get in touch with one of our expert agents.