In the last decade, lenders tightened up on mortgage loan qualifications. If you believe you're ready to buy a home, you might begin by stopping by a community bank or local credit union. Typically, these small and locally based financial institutions have a larger stake in encouraging homeownership within their hometowns. Loan officers there can guide you through the process and give you a realistic picture of your readiness to take out a mortgage and how much you can afford.
Applying for Your First Mortgage
Before you apply for a mortgage or even start shopping around for a home, take a realistic look at your situation by gathering some information:
- Your monthly income and currently monthly debt and bill payments
- The total amount of savings and outstanding debt
- Your credit scores
Now you're ready to work with a mortgage lender to figure out how much you can afford to pay for monthly mortgage payments. You'll typically need to demonstrate income with pay stubs. If you're self-employed, you may need to give the lender tax returns from the past couple of years. Lenders will also take a look at current debt, such as credit cards and auto or student loans.
The lender will also ask if you have any cash set aside for a down payment. To qualify for the best rates, you could put 20 percent down. However, loan officers may help you find loan programs that only require 10 percent or even 0 percent down.
If you buy a home, you should also factor in the cost of homeowners insurance and taxes. Unlike an apartment, you'll also need to pay for maintenance and repairs when you own your own home. On the other hand, you won't have to pay rent any longer, and in some cases, your mortgage payments may be lower or about the same as what you pay in rent today. You can also deduct interest from your taxes. Also, you may improve your financial security by investing in an asset like a home. Most Americans say that their home is the largest asset that they own.
When is a Good Time to Buy a Home?
If you have stable income prospects, a good credit history, and plan to stay in your town or city for a few years, you may decide you can benefit from home ownership. Otherwise, you might decide to keep renting to give you time to improve your credit, settle into your career, and put more money aside for a down payment. If you're not certain what you should do, a chat with a loan officer at your community bank or credit union can help you understand your options better. After you work together to figure out how large of a mortgage payment you can afford, you can enjoy shopping around for your new house.
Today’s consumers have the information and the tools they need to take control of their finances—and Bundlefi is ready to empower consumers to make a change. Contact us today, or start exploring local banking institutions to see why it pays to keep your money close to home!