Interest rates are at historic lows, which can provide first-time homebuyers with more purchasing power. Many real estate agents are offering virtual home tours, so you can view multiple homes via the safety and comfort of your home, then make a personal appointment to see those homes that really interest you.
Here are three things you should do now to get prepared for buying your first home:
1: Prepare Your Credit
Mortgage lenders typically require at least 24 months of good credit history for you to qualify for a mortgage. It's usually a good idea to have a few credit cards, a few installment loans, and a 24-month history of making rent payments on time.
2: Prepare Your Cash Flow
Mortgage lenders typically require less than a 43% debt-to-income ratio (DTI) to qualify for a mortgage. Debt-to-income ratio means that your total monthly debt payments (including the new mortgage payment) should be no more than 43% of your monthly income.
3: Prepare Your Savings
Mortgage lenders typically require you to have a certain amount of savings in reserve to qualify for a mortgage. Your savings should be in your account for at least three months, and any large deposits, excluding your paycheck directly deposited from your employer's, will need to be explained and documented. The amount of the required savings will vary based on the loan program that you choose. However, a good goal is to save enough for a 3%-5% down payment, plus 1-3 months of mortgage payment reserves. For example, if your new mortgage payments will be $1,400 per month, you should probably aim to save approximately $4,200 plus the amount of your down payment.
Of course, each home loan program has its own specific guidelines and eligibility criteria. That's why it's important to speak to a licensed mortgage loan originator who can help you consider your options and evaluate your specific scenario. Please contact us to get started on your path to homeownership.
Sep 14, 2020