How Debt Can Impact Home Buying
Buying a house is exciting – you envision all the projects and renovations that you want to do – and of course, all of the great memories that will be created. But, we all know that there is a lot that goes into making that happen. One thing to be mindful of is debt – it can not only sideline personal goals but it can negatively affect the home buying process. Here are a few things to consider when assessing your financial situation.
Let’s face it – it’s too easy to accrue credit card debt if you’re not careful. Last minute purchases, impulsive buys and incidentals can wreak havoc on your finances and it’s very common to turn to credit cards as a solution. If you’re thinking about buying a house – it’s important to consider your overall credit. High balances and delinquent payments will flag potential lenders and can lead to a denial on a home. Make sure to be diligent about paying off cards and check that you’re in good shape before applying.
Ratios & Percentages
Though credit cards are a common form of financial burden — other factors could impact closing. It’s wise to consider how much your earrings stack up against money owed. The debt-to-income ratio tips lenders off as to the state of your finances; most prefer it to be under 36% to consider you a low risk borrower. Tabulate what you owe each month and divide across your gross income to find out where you stand. This creates a peace of mind for you and for the lender to know that you are in control of your money across the board.
Create A Nest Egg
Even if you feel that your debt is handled and that you have a decent credit score – it’s still essential to create a buffer. Opening a savings account and adding to it regularly is a smart way to gain that extra security. Incidentals arise when we least expect it – so when applying for a home, it’s good to know that you have extra cash on the side in case anything happens. Additionally, when in the process of acquiring a loan – savings can potentially go towards a down payment and other costs related to ownership.
If you are in good financial standing and you’re ready to move forward – the next step is to get pre-approved for a loan. With all of the information out there and a multitude of lenders – this task can feel very daunting. At Minute Mortgage, we strive to decrease that stress and present a rate that makes sense for your circumstances. Our certified experts help you check each box – we let you know the type of documentation, credit scores and tax forms that you will need to purchase a home. Another perk in utilizing our service is that all paperwork can be submitted through our simple online portal and many receive an answer to their pre-approval in minutes.