MORTGAGE MADE EASY IN TODAY’S BUSY HOME MARKET, BEING INFORMED IS MORE VITAL THAN EVER. THIS IS ESPECIALLY TRUE WHEN IT COMES TO GETTING A MORTGAGE. A LOAN IS THE FIRST STEP TO HOME OWNERSHIP, SO IT’S IMPORTANT TO KNOW A FEW THINGS BEFORE YOU SET OUT TO SECURE ONE. HERE IS SOME HELPFUL ADVICE TO CONSIDER AS YOU APPLY FOR A LOAN.
KNOW YOUR CREDIT SCORE
A credit score can make a big difference in how much home you can afford. For example, if you are applying for a 30-year mortgage on a $200,000 house and you have a FICO® score of 650, you can expect to pay over $25,000 more in interest over the life of the loan than someone with a credit score 680. To keep your credit score high, make sure you are paying all your bills on time and keeping credit card balances as low as possible. Also, keep current credit cards
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open. Closing a card will increase the portion of available credit you use, which can lower your score. Lastly, track your credit score. Many banks and credit card companies offer this automatically through their website or apps.
ESTIMATE HOW MUCH YOU CAN BORROW
Use an online mortgage payment calculator to estimate monthly payments for mortgages of different sizes. As you think about getting
a loan, remember that your monthly housing payment (including taxes and insurance) should be no more than 28% of your pre-tax income, according to fool.com. Also, your total debt (including your mortgage payment) should be no more than 36% of your pre-tax income. The ratio that produces the lower payment is what the lender will use. Many lenders have more generous qualification ratios, but these are traditionally the most common. Just because you qualify for a certain amount doesn’t mean that
