The Top Four Factors to Consider When Applying for a Mortgage
When embarking on the journey toward homeownership, it's essential to take a comprehensive approach when applying for a mortgage. To ensure that you're making an informed and wise decision, several key factors should be considered.
Credit Score
Firstly, your credit score is a vital aspect that lenders consider when determining the interest rate you'll be offered. A good credit score can result in a lower interest rate, saving you a considerable amount of money in the long run. For this reason, knowing your credit score and staying current with all bill payments are great preparation steps when applying for a home loan.
DTI
Additionally, your debt-to-income ratio will be examined by lenders to determine your ability to make your mortgage payments each month. It's essential to have a manageable debt-to-income (DTI) ratio to increase the likelihood of approval. Your DTI is your monthly bills and debts compared to your monthly income. To calculate DTI, add your monthly debts and divide this number by your gross monthly income. Multiply this by 100 to get your DTI percentage.
Down Payment
Another vital factor to remember is the amount you can put down for your down payment. Down Payment requirements vary depending on the type of loan you choose. For instance, VA Loans qualify for 0% down payment. Conventional loans have 3, 5, 10, and 20% down payment options. It's important to consider your available savings to contribute to your downpayment and closing costs when determining the best type of loan for you.
Loan Type
Speaking of loan types, it's important to know your options. Each loan type has different credit score requirements, down payment options, and different qualified properties. As well, each loan type has its pros and cons, so it's essential to research and choose the best option for you. At Imagine Home Lending, options include Conventional, FHA, VA, and USDA Loans. Speak with your local Imagine Home Lending Mortgage Loan Officer today to help determine which loan type is best for you.
By considering all of these factors, you can secure the best possible mortgage rate and ensure that you can afford your new home comfortably. Feeling overwhelmed by these five factors? Give our Loan Officers a call today to discuss your options. Until then, happy house hunting!