Before your look for a mortgage, gathering the best mortgage tips on evaluating your bank account, credit, etc. can help set you up for success. Finding the right mortgage for your family can be overwhelming, but it really doesn’t have to be. Once you understand a few key things that lenders are looking for, you’ll have a lot better idea about what to expect, and more confidence when you approach it.
So here are our best mortgage tips for new home buyers:
- Keep money in the bank. If you are applying for a mortgage, lenders will want to see that you have savings in reserve, so you can handle whatever may pop up in the upcoming months without missing a payment. They also like to see your down payment sitting in your account for a month or two before the process really starts – so it’s not the best time to be making big purchases.
- Borrow what you can afford NOW. People often strategize to take a mortgage that is higher than they can really afford, based on the thought that their income will increase over time. However, the healthier approach is to go for the more expensive house when you can afford it, not before.
- Aim to pay 20% down. You can definitely go for a lower down payment, but laying down 20% will allow you to avoid paying Private Mortgage Insurance (PMI). This is another good reason to have savings laid away, so that you can cover any fees and still pay 20% down instead of paying PMI until you get your mortgage down.
- Remember that lenders look at DTI – debt-to-income ratio. Most mortgages have a maximum DTI ratio of 43%. Even if you have a good debt-to-income ratio, there are some things you can do to make sure it stays stable, like don’t make any large purchases, and don’t co-sign a loan for anyone. Even if you’re not making payments, it will increase your debt-to-income ratio. Check out our cheat sheet of 10 Things to Avoid When You’re Buying a Home for more mortgage tips on what NOT to do.)
- You can get housing counseling as well as credit counseling. There are a lot of counseling agencies that can help you decide on housing, look at debt repayment options, or develop a long-term money management plan. Find a U.S. Department of Housing and Urban Development approved agency here.
Even following the best mortgage tips around, there are factors like credit or others that can make it difficult. Don’t worry. If you’re having a hard time finding a loan that works for you, give us a call. At United Faith Mortgage, we do all of our underwriting in house, which means we can often dramatically reduce your fees and you’ll get the personal help only unique direct lenders like us can offer. We’ll work hard to get you the loan you need – we don’t just sift through and pick out the easy ones.
The Christian Mortgage Mom