Thinking of Buying a Home? 4 Things Lenders Consider

If you’re thinking about buying a new home, contacting your local realtor through REMAX-Georgia.com is a great way to see what’s available in your area and start pricing homes. While you’re shopping for a new home, remember the following four things lenders consider:

Debt-to-income ratio. Known as DTI, your debt-to-income ratio is calculated by dividing your monthly debt load by your monthly income. Lenders look for a DTI below 36 percent. This is to ensure you can afford a mortgage payment in addition to your current debts. A lower DTI means a higher the mortgage payment approval.

Credit score. Make sure you review your credit score before applying for a mortgage. Factors such as length of credit history, payment history, overall level of debt and types of credit applied for all contribute to your credit score. While each lender has their own specific credit requirements, higher credit scores mean lower interest rates and lower payments. Conversely, a lower credit score may still qualify you for a mortgage but you will be paying higher interest rates and ultimately, higher monthly payments.

Down payment and closing costs. Buying a home requires a down payment anywhere from 3.5 percent to 20 percent of the sale price of the home. A higher down payment will result in a better interest rate so it’s a good idea to have cash on hand for the payment. You will also have to pay closing costs, which run two to five percent of the home’s sale price.

Personal financial situation. While you can buy a home with little savings and less than wonderful credit, lenders prefer borrowers who have zero debt, good credit and three to six months of expenses saved up – in addition to the cash for the down payment and closing costs.

Keep these factors in mind and you’ll be in perfect position to buy a new home.

 

Tags: Credit history, Credit score, Down payment, Mortgage loan

Category: Credit