Lending habits have drastically changed over the years. Once lenient banks have now turned into critics. Buying a new home can be attainable if you follow these guidelines.
Set Yourself Up For Success
Lenders will choose the most reliable candidates so start looking over your financial portfolio to see how you measure up. First have you stayed at a job for at least 2 years? Lenders want to see you can stick to your commitments. This also applies to changing up your career path. As long as you can prove your stability you are in the clear. With that said a living made off of commission looks more concerning than a salary.
Make sure your credit is in order before you apply because your interest rate is affected by it. Pay off all open collections and take care of any other credit issues. Here are the 3 aspects lenders look for in a credit check:
• Payment History
Don’t let payments go sequentially unpaid or become delinquent.
• Debt-to-Income Ratio
Keep your total gross income higher than your outstanding debts.
• Age of Credit History
If you open an account within a close proximity to applying for a loan, lenders will think you needed more credit.
Quick tip: Keep you credit balance bellow 30%.
What Are Your Assets?
Having a large amount of money in the bank is very appealing because you have stored up money for this expensive purchase. Think about your liquid assets or how you can build up quickly accessible money. This tells lenders you have access to funds to pay your mortgage.
Lenders also want to see that you have assets they can take if you default.
What’s Next?
If you don’t have a lender you want to work with ask your realtor for a recommendation. Don’t continue the lending conversation with someone you don’t feel has answered all of your questions or feel uncomfortable with. Once you pick a lender they will give you a Good Faith Estimate. This is a legally binding form that outlines what you are signing.
What Finances to Expect:
• You will be spending about $945/month for each $100,000 you borrow.
• Closing costs are about 2-3.5% of the purchase price.
If you find the right rental property don’t let it slip out of your hands because your finances weren’t in order. Once you invest in a rental property you will reap the financial benefits.
