The Ins and Outs of Taking out a Mortgage
Many people can’t afford to make an all-cash offer when buying a home. Today I’ll go over the process of obtaining mortgage financing and give you some tips on how to navigate the process.
Not all homebuyers can afford to make an all-cash offer, which is why I want to talk a little but about mortgage financing the purchase of a home.
First of all, in order to get good financing options, you need a minimum credit score of 620. If your score is below that number, we suggest that you work on your credit score before we go any further. You’re also going to need a 5% down payment, so make sure that money is in your savings account.
How do you know how much money you qualify for in order to purchase a house? Typically, we use a calculation of 35%, which means the house payment and additional costs associated with the home, like utility bills, can’t exceed 35% of your gross income.
“ Your debt ratio cannot exceed 42% of your gross income.
This year, the interest rate being used is 4.64%, which means that number will be used in the calculation to see what you qualify for, even if you can get a lower interest rate.
Another thing we have to consider is your debt ratio, which can’t exceed 42% of your gross income. Your debt ratio includes your house payment, credit cards, car payment, bills, and student loans if you have them. Any of those debts cannot exceed 42%, and they will affect how much you qualify for in order to purchase a home.
If you have any other questions about mortgage financing, or if you have any other real estate-related questions, please don’t hesitate to give us a call or send us an email. We look forward to hearing from you!