With the spring home-shopping season right around the corner, potential buyers are encouraged to begin preparing their finances. Working with a real estate professional will provide the proper guidance for home buyers to be prepared at to what is expected during the buying process (especially with a competitive seller’s market).

Homeownership is a dream shared by millions of Americans, but it’s not always easy for those with little or no experience in buying a home. One of the most important aspects of readiness for homeownership is having the money to support that home purchase.

Where to Begin
It is important for potential home buyers to eliminate as much debt as possible prior to buying a home. The debt-to-income ratio is often the biggest issue a lender will look at because would-be borrowers are about to add hundreds of thousands of dollars to their obligations. Generally speaking, home buyers should pay no more than 28 percent of their gross monthly incomes for their mortgage bills, and if a big chunk of that income is already going to other debts, lenders are unlikely to approve an application.

Hopeful buyers should also determine just “how much house” they can afford based on available properties in their areas. A buyer’s real estate agent or mortgage loan officer can provide that information.

Laying the Groundwork
Once the research and financial analysis has been completed, it’s time to think about credit standings and ability to make a sizable down payment. These two issues often go hand-in-hand with debt-to-income ratios because less debt means more money can go into savings as credit scores naturally start to rise. Usually the larger the down payment, the better the mortgage deals home buyers are likely to get, both in terms of getting approval on an application and lowering the ongoing costs associated with a home loan (i.e. lower interest rates and no requirement for mortgage insurance).

In addition, home shoppers will have to start putting together all their necessary financial documents that are typically associated with the mortgage process. These include pay stubs and bank statements – to prove income and savings – as well as tax returns for at least the past few years and other supporting documentation that lenders will use to verify claims made on a mortgage application.

It’s strongly encouraged for would-be buyers to get pre-approval on their mortgages, rather than house hunting first because that will help them expedite the bidding process

Need to be pre-approved for a mortgage loan? Contact Sibcy Cline Mortgage Services.

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