San Francisco | Buying Your First Home is a Big Decision |Mortgage residential and commercial home loans SF
Buying a home is one of the greatest investments you will ever make. The best — and least stressful — way to purchase a home is to be well educated throughout the process.
Before you even start looking for a house to buy, you need to review your financial situation. This will let you know how much of a down payment you can afford and how large a monthly mortgage payment you can handle. Lenders will look at the ration of how much you make to how much you owe. Most will require that your monthly housing costs remain under 28% of your total monthly income and that your total debt is less than 36% of your monthly income.
But you should look at what fits into your budget, not what the lender says you can afford. If you are currently making a rent payment of $1200 a month and barely getting by, how could you expect a mortgage of that size with the added insurance and maintenance costs of owning a home? You have to go with what works for your budget and finances. Remember, you can always work your way up to a larger home over time.
Once you have determined how much home you can afford, you need to check on your credit report and score. Lenders will rely heavily on your credit score when deciding whether or not to lend to you. It will also help decide how much interest you will pay. Your credit score is determined by the information in your credit file. If something is incorrect, your score will be affected.
Your score is made up of your payment history, your outstanding debts and how often you apply for credit. Most lenders will use your FICO score. If you have a score of over 700, you should have no problem finding financing.
The best way to improve your credit score is to pay your bills on time. You can also pay off your credit card debt and hold off from applying for new credit to raise your score.
It is best to review your report to make sure it is accurate well in advance. It may take time to clear up any errors before you apply for a mortgage.
In today’s real estate market, sellers like to work with buyers who are pre-approved for a mortgage. Pre-approval means that you have submitted a complete loan application and that the lender has verified your information, checked your credit and determined how much mortgage you can borrow. When you are preapproved, the lender is saying that you can borrow a certain dollar amount.
With pre-approval, the seller knows you have financial backing and you know exactly how much you can spend. This keeps you from a lot of stress of worrying if you will be approved for a mortgage for your dream home. You already know what you can afford.
Take the time to prepare to buy a home before you even start looking, it will save you a lot of stress and make the process much easier.
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