Buying a home can sound like a pretty daunting idea, especially in our current market. However, there are ways to empower yourself by strengthening your financial standing. It’s all a numbers game when buying a house. The following categories are items that lenders will look at to determine your eligibility for a loan. Review them to find out what you can work on to increase your buying power.
Increase savings for your down payment
A down payment will often times increase the likelihood your offer will standout from other offers. The down payment is typically around 20% of the home’s sale price. That amount can sound like a lot, but there are ways to slowing increase your savings. First, you could put a little away from each paycheck into a savings account. Your savings will start growing without you needing to put in much work. You could even open up a special savings account just for your down payment savings. Second, you could find ways to generate additional income. Explore an opportunity for a part time job, and dedicate all the additional income towards your savings.
There are many benefits to offering a serious down payment. Outside of your offer being a standout, you may also be able to negotiate a lower interest rate on your mortgage and it could even remove private mortgage insurance (PMI). So, get to saving!
Improve your credit score
It’s pretty straight forward – when your credit score is better, your interest rate is better. It’s not something that happens overnight, it takes work and dedication. But, it will be beneficial in the long run. There are many things that factor into your credit score including your payment history, amounts owed, length of credit history, credit mix, and new credit. To start raising your score, focus on paying down your credit cards, especially those with high interest rates. Avoid opening unnecessary lines of credit. Additionally, try not to make any large purchasing leading up to the time you are preparing to make an offer. Remember that student loans also affect your financial picture so paying them off consistently will improve your standing.
Stabilize your debt to increase buying power
Your debt-to-income ratio is also looked at by lenders to determine what you can afford. The purpose is for lenders to confirm you can pay your mortgage on top of all your other debts. They figure this out by finding out which portion of your monthly income will go to your mortgage payments and which portion will go to your other debts (the principal, interest, taxes, and insurance of your mortgage payments, credit card payments, student loans, and any other loan payments). When you pay off your credit cards and make steady progress on decreasing your loans, it will in turn help your debt-to-income ratio.
Having the right realtor always increases your buying power! The right realtor knows the market, the area, great lenders and your specific situation, which allows them to assist the best way possible. We can do just that! If you have any questions or want to get started increasing your buying power, reach out!
Phone: (208) 818-2456 or (208) 818-2365
Credit: Windermere Blog by Sandy Dodge