Having your own home is the dream of many families, but before taking that step it is important to know everything you need when applying for a mortgage to apply successfully.
1. Know Your Credit Score
This is one of the main factors that lenders will evaluate, your credit score reflects your payment history and responsibility with your debts. A high score will help you get a better interest rate.
Usually, lenders usually require a minimum score of 620, however, there are some programs that allow less. Like our Tax ID Max EEP, an ideal option for those who don’t qualify for traditional loans, but want to lock in the price of their home today. Contact us if you want to know more about this loan!
2. Prepare a Down Payment
This payment is the one that you contribute directly to the purchase of the house, traditionally, banks ask for 20% of the total as a down payment. However, there are options such as FHA loans, which accept a Down Payment as low as 3.5%.
Depending on your credit score, the type of home, and the reason you’re buying it, your down payment may vary. If owning your own home is part of your long-term goals, you can start saving this money.
3. Calculate your income and debts (DTI)
In addition to knowing your credit score, you should also know your debt-to-income ratio, as lenders will evaluate it when you apply for credit to make sure you can repay the credit without financial difficulties.
To calculate this ratio, add your monthly bills such as rent payments, food, maintenance, transportation, credit cards, among others. Divide the total by your gross monthly income (before taxes) and the result is your DTI represented as a percentage. An ideal DTI is less than 43%. The lower this percentage, the less risk you pose to lenders.
4. Learn about the different types of mortgages
As you may have already noticed, not all mortgages are the same, there are different ones depending on your needs or financial situation. Choosing the one that best suits you will increase the likelihood of approval.
· Conventional loans: Require a higher credit score, but usually have very good rates.
· FHA loans: ideal for first-time buyers or people with little money for a down payment.
· VA loans: For veterans or active military service members.
· USDA loans: Exclusively for homes in rural areas, usually no down payment is needed.
If you need help finding out which type of loan is best for you, do not hesitate to write to us.
5. Prepare all documentation
Having the necessary papers on hand will make the process easier and faster. The documents requested will depend on the type of mortgage you choose, however, here is a list to have a good approach:
– Social Security or ITIN
– Proof of financial assets (bank statements for the last 2-3 months)
– Investment or savings account information (if applicable)
– Certificate of employment (confirming your position, salary, and seniority)
– Credit score
Do you feel ready? Apply for your credit now by clicking here
