Looking to Buy a Home? Start Here.
by Chase Hansen
Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.” This is true when you are considering buying a home. Serious buyers should start the process in their lender’s office and not on Zillow or at an open house. Potential homebuyers benefit in a lot of ways by speaking with a lender first and getting pre-qualified.
A prequalified or preapproved buyer has more leverage when making an offer than someone who has not spoken with a lender. A good lender can explain what programs and options are available to the borrower, and tailor those options to their specific needs. Lenders will check credit to assure there are no alerts or problems that might be an issue. The buyer will then find out the maximum price for which they may qualify, giving them realistic goals about pricing. Many clients find they qualify for more than they want to pay monthly, and many clients need to do some work before they can get pre-qualified. A good lender can help answer all your questions and set you on the right path to homeownership.
Here are some important tips when preparing to buy a house:
- Find a lender that puts you at ease. Most importantly, find a lender you are comfortable speaking with, and who will really listen to your needs and what you are trying to accomplish. One loan program does not fit all, so understanding what your ultimate goal is helps a lot in determining what program fits you best. A good lender asks the right questions, listens to the answers, and then presents the best options for each client.
- Minimize debt. If you are shopping for a home, do not go out and buy a new car or open new lines of credit beforehand. One of the biggest determining factors in qualifying for a loan is your debt-to-income, DTI, ratio which is determined by taking the total housing expense, including the mortgage payment, property taxes, homeowners insurance, and HOA dues, and dividing that by your total monthly income. This is your front-end DTI ratio. Your back-end DTI ratio is your total housing expense plus all revolving debt, such as loans on cars, RVs, boats, installment loans, student loans, and credit card balances. If the DTI ratio is too high, it will disqualify you as quickly as anything else. Minimizing outside or personal debt can ultimately help your credit score and you will be able to qualify for more home.
- Start saving now. Having the ability to put money down on a home purchase can open the door to more favorable loan products. Although there are some programs that offer one hundred percent financing, like the incredible VA loan for veterans, most loan options require a down payment. For example, most lenders will require at least five percent down for a conventional loan on a primary residence, and FHA programs require three and a half percent down. USDA loans are a great option with a zero down payment in what are considered more rural areas like Mesquite, Bunkerville, Moapa Valley, and Beaver Dam. But they have tighter restrictions on DTI ratios than Conventional, FHA, or VA loans. Even if you choose a product with no money down lenders like to see some assets saved up in reserves.
- Get the most out of your credit score. Your credit score is a big factor in qualifying for a home loan. A low credit score can disqualify you right out of the gate. A great credit score can qualify you for the best rates and pricing. Your lender can look at your credit score and, if need be, can suggest ways to help improve your credit score to help you qualify. Simple things like paying down your credit cards but keeping a small balance can help quickly improve credit. Once again, a lender will be able to analyze your credit and maximize your credit score.
Call our team at Cherry Creek Mortgage. We serve Arizona, Nevada, Utah, and Wyoming.
Visit Cherry Creek in St. George at 1224 S. River Rd. A106 or call (435) 674-9200.
Visit Chase Hansen, Loan Originator, NMLS # 1321014 at Cherry Creek in Mesquite, 340 Falcon Ridge Pkwy. Bldg. 100, or call (702) 345-2820.