The housing market crashed sometime in the past. Those who were financing a mortgage were left with huge losses and most homes were unfortunately foreclosed. The market has recovered and there is no better time for you to buy a house than today. Mortgage lenders have also loosened their lending requirements and now have some of the most attractive rates for their loans.
However, many people will leave the crucial choice of getting a mortgage to chance and take little time to understand their options and prepare for their loan.
A mortgage planner based in Salt Lake City will be an essential expert when shopping for a home loan. He or she will not only help you choose a loan suited to your financial circumstances but will also help you prepare your finances for mortgage approval. Here are some strategies the mortgage planner might recommend to re-align your finances for your home loan:
Reduce Your Debt-to-Income Ratio
The first element most lenders will assess when evaluating your application is your DTI (debt-to-income) ratio. This considers the number of your monthly debt obligations vis-à-vis your income. This is an indicator of how comfortably you can meet the repayment of your home loan. Among the methods you can use to lower your DTI ratio is the consolidation of your debts into low monthly payments. This leaves you with some money, which you can use to finance your home loan.
Minimize New Debts
Applying for a new credit card or a loan within a few months before your mortgage will lower your credit score. A low credit score, in turn, affects your eligibility for a loan and the interest rate your lender will offer. It is ideal to postpone the application of new credit lines for 6-12 months before your mortgage application. This will avert the risk of your mortgage lender viewing you as a desperate borrower secondary to new multiple lines of credit.
Start Saving for Your Down Payment
A substantial down payment will attract optimal interest rates and reduce the monthly repayments for your loan. This also negates the need for the payment of insurance on your mortgage and further reduce your monthly home loan obligations. It might be tricky to save the huge amount needed for a down payment, but you can start putting a designated value into a dedicated savings fund much like you would an automatic payment.
Getting a mortgage pre-approval is your first step on your homeownership journey. This will allow you to know your limits on the loan you can get and avoid applying for homes that are beyond your means. This way, the processing of your mortgage will be fast and you can enjoy the best rates.
Shopping for a mortgage requires tact to guarantee that you make the right choices. With the above steps to improve your finances, you will not only become an attractive borrower but will also gain a better understanding of what works for you. This way, your home loan’s repayment will be enjoyable rather than a painstaking journey where your home might be foreclosed anytime.
