Estimated reading time: 3.5 minutes
When you know your affordability and buying power, you can be confident you’re in the best position to enter the housing market! To help you prepare for this financial journey, we’ve outlined how to review your finances, get to know your affordability, and helpful tools to get you to the closing table.
Before you apply for a pre-approval, it’s important to make sure your finances can handle more debt. Review your savings, income, and monthly debts, including any credit card debt, car payments and insurance, student or tuition payments, and any other outstanding loan balance.
Throughout the mortgage approval process and as a homeowner, you’ll encounter plenty of one-time costs, ongoing costs, and other expenses. As you create your housing budget, it’s also a good idea to think about how you’ll manage these costs and set up an emergency fund. This fund can help cover unexpected expenses, like home repairs or income loss.
A Loan Originator (LO) is a licensed professional who helps prospective homeowners find the best mortgage solution for their current needs and future goals. They’ll stay by your side throughout the process, from application through closing. While examining your credit and debts, your LO will explain what program and guidelines work best for you!
Your credit score and credit history are important parts of your financing approval. Your lender will examine these factors during the underwriting and approval process. Generally, the higher your credit score, the more loan options will be available to you. A higher score indicates to your lender that you can handle repaying your monthly mortgage payments.
Every twelve months, you can check your credit report for free. For your financial health, be sure the information contained within the report is accurate, including names, addresses, your Social Security number, account names and numbers, and loans. If any information is inaccurate, dispute the information as soon as possible to have it corrected.
If your credit score is holding you back from mortgage approval, speak with your Loan Originator! While our Loan Originators are not credit experts, they can offer you debt management and credit assistance through a Fannie Mae approved platform.
Your debt-to-income (DTI) ratio is a metric used to determine your ability to pay your monthly mortgage payments. Your DTI is specifically the amount of money you owe (your debts) compared to the amount of money you earn (your income). While DTI requirements are dependent on loan programs, a lower ratio may indicate to a mortgage lender that you have a healthy balance between your income and debt. This ratio is important to consider for your monthly mortgage payment and interest rate.
Even though you’re a first-time homebuyer, you don’t have to navigate the process on your own! When you’re shopping for a car, you may go to a dealership to speak with a salesperson and take a closer look at your options based on your needs and budget. In the mortgage process, you’ll lean on a Licensed Loan Originator who can make expert recommendations for a mortgage program and interest rate term.
Using a home affordability calculator and mortgage calculator can help visualize your monthly payment breakdown and how your payments are affected by your down payment, interest rate, and insurance.
When you work with a Licensed Loan Originator, you’re putting yourself in a great position to get to the closing table! From conventional and government programs to renovation and specialty programs, we’ve got you covered!
Ready to learn more? Contact us today!
Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.
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