Ready to become a homeowner? Buying your first home is a big deal and probably the largest single investment decision you’ll ever make. Here’s some things to keep in mind.
First thing: get your credit in order.
While not the only item lenders look at, your credit score is one of the most important. If you’re not sure where you stand, you can get a free credit report once a year online by visiting annualcreditreport.com. Make sure it’s accurate and pay down high credit balances. Reducing debt has a positive effect on your score which helps you get a loan approval with a better interest rate.
Set your budget for your mortgage loan.
The best way to figure out how much house you can afford is to start with your income. Make a list of all your current expenses and those you might face as a homeowner. These include your monthly bills, cost of food, entertainment, and travel, for example. Then once you have a house, you’d want to estimate your property taxes and homeowners’ insurance. And don’t forget to factor in one-time costs during the buying process, including closing costs and your down payment. The internet has several cost calculators that can help you; many are on mortgage lenders’ home pages.
Figure out your debt-to-income ratio (DTI).
Even with a strong income stream, lenders will not qualify you for a mortgage unless your DTI is less than 40%. You can improve your debt-to-income ratio by either increasing your monthly income or decreasing the amount of debt you carry each month. The easiest way to do this is pay down as much existing debt as you can.
Pre-qualified is good but getting pre-approved for a mortgage loan is better.
And here’s the difference: pre-qualification gauges your ability to service a loan and is usually based on the information you provide; but pre-approval goes further and is a written commitment from a lender to extend a mortgage to you for a specific amount and time period. Many listing agents and sellers require proof of one or the other but the preapproval is taken more seriously. and where you have it, sellers will often take your offer more seriously and will strengthen your offer.
And for goodness sakes, don’t make financial changes during the loan process.
As one lender puts it, “All aspects of your income and finances are on the table when applying for a loan. Don’t make any major purchases like a car, large appliances or furniture, and don’t move untraceable money into or around your accounts. Also avoid changing employers during the home loan process. Steady employment will likely be a factor in determining what loan you qualify for.” Excellent advice!
While there’s other factors to consider, these are probably the top tier to address. And this holds for returning buyers as well.
Spring buying season is here and the Georgia residential market is on the move. New listings increased 26 percent to 15,020 and the number of days listings are on the market has dropped as well. There’s slower growth in the price of homes and with inventory levels up by 21 percent there’s more choices in today’s market.
A more perfect time to buy that new house would be hard to find … so jump on in!
Gary Wisenbaker (#garysellsvaldosta), a REALTOR® with Century21 Realty Advisors in Valdosta, can be reached at (912-713-2553) or gwisenbaker@C21realtyadvisors.com