Buying a Home February 28, 2024

3 things to consider as you work toward home ownership.

What do you need to consider as you are trying to plan to finally buy a house? Many people only focus on their credit score! There are some other elements that affect how much home you can attain. These are some things a lender will look at when it’s time to get you pre-approved. I’m not a Mortgage Lender, but I have a great one on my team that would be happy to sit down with you and give you steps to get each of these things into the best situation.

Debt-to-Income Ratio (DTI):

Lenders typically prefer a DTI below 43% for conventional loans.
Calculate your DTI by dividing your monthly debts by gross income.
Aim to pay off extra debt to reach a DTI that aligns with lenders’ requirements.

Credit Score:

A good credit score improves loan approval chances.
Aim for a score above 620 for conventional loans.
Check your credit report for accuracy and work on improving it if needed.
One way to improve your credit outside of making payments on time is to never use more than 30% of the total amount of credit limit.

Savings:

Save at least 3.5% for a down payment, but more is advantageous.
Additional funds for closing costs, inspections, and unforeseen expenses. I have a handy calculator that can give a pretty accurate number of the expected amount you’d need to bring to closing so you can properly budget.

Above all, your budget is the most important element of how much home you can afford! Just because you qualify, that does not mean we need to max out that number if the monthly payment is uncomfortable for you. Maybe you have other goals, debts to pay off still, or want to travel or save for retirement. There is no one size fits all. I’m happy to discuss what I can and my lender partners will fill in what I can’t, and if you need even more, I have a fantastic CFP that can give you even more insight to reaching your dreams. Full disclosure, it’s my husband.

Homebuying doesn’t have to be scary, let me guide you through it all!