Debt can be daunting – but just because you have debt doesn’t necessarily mean that you won’t be able to purchase a home. Read on for a few tips to help you as you enter into the home buying process.
Keep your credit in-mind.
Because your credit is one of the key factors taken into account when qualifying for a home loan, it is imperative that you understand how credit works. Just because you have debt, does not guarantee that your credit score has taken a substantial hit. In fact, if you are diligent with paying your bills on time, manage how you utilize credit, and don’t unnecessarily open or close credit accounts, you are already taking important steps to properly manage, maintain, and potentially improve your credit score.
Decrease your DTI.
DTI, or debt-to-income ratio, indicates how much you owe on debt compared to how much you earn as income, and is very important when working toward qualifying for a home loan. To calculate your DTI, add up all of your monthly debt payments, including, but not limited to: credit card debt, auto, student, and other loans, as well as your gross monthly income and divide by two. It is often recommended to have a DTI that is below 43%; however, the lower your DTI, the better you may look to lenders.
In order to decrease your DTI, there are some steps that you may be able to take – such as refinancing current loans to help you obtain lower interest rates or better repayment terms, or updating your budget to cut back on your monthly spending and debts. A Certified Financial Planner™ or trusted Financial Professional may be able to provide you with additional steps to take in decreasing your DTI.
A pre-approval is a written statement from your lender that explains you are approved for a mortgage up to a specific amount within a certain time frame, barring any changes to your financial situation, by taking an in-depth look into your income, assets, debts, and credit history. In addition to providing you with an idea of your ideal price range and budget, a pre-approval may also help to expedite the purchase process and reveal potential obstacles before you are obligated by contract to purchase.
To get the pre-approval process started, reach out to one of our Licensed Loan Officers today!
Explore your options.
Alongside your Loan Officer, take a look at your goals and options to come up with a plan that will fit into your lifestyle and financial situation. Do you want a home in the city, in the countryside, or are you flexible? Does it need to be a certain square footage? Must the property be move-in ready, or would you be willing to fix the home up, if needed?
Based upon those goals, as well as what you’re looking for, your Loan Officer can help to identify loan programs and options that may be best suited for you, such as programs that may offer options for lower down payments, or those specifically geared toward first-time home buyers or Veterans. You may also want to take this time to discuss down payment assistance programs, or requirements and information pertaining to gift funds that could be used for a down payment.
So, where do I go from here?
If you are certain that purchasing a home is something you’re ready to explore, the first step is to get in touch with a Licensed Loan Officer to begin the pre-approval process and determine what you may be able to afford and assist you throughout the loan process.
Purchasing a home can be a stressful process, no matter your financial circumstances, but by working with an experienced professional, you can determine if home ownership is realistic or possible and move forward with confidence.
This is for informational purposes only and is not an offer to extend consumer credit. Terms and conditions of programs, products, and services are subject to change without notice. All loans are subject to credit and property approval. Certain restrictions may apply on all programs. Not all applicants will qualify. Mortgage Trust, Inc. is not a Credit Counselor. Please consult with a trusted financial professional to determine if investing in real estate is right for you. Any opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of Mortgage Trust, Inc.
Mortgage Trust, Inc. is an Equal Housing Lender. NMLS 3250