Loan for the American Dream: What to Know About Financing Your First House
Saturday, October 1, 2016, 6:00 AM | Leave Comment
Most people dream of owning their own home and making an investment in real estate that can pay off in future years.
The most important step of purchasing a home for the first time is obtaining a loan to ensure you have the finances available to shop around.
When applying for a loan, there are a few important steps to take to become approved quickly.
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Increase Your Credit Score
Your credit score is one of the main factors that determines if you’ll be eligible for a home loan.
It’s important to increase your score to get approved and obtain a lower interest rate, which can save you more money as you pay off the mortgage each month.
Increase your credit score to at least 580 by making your payments on time, paying off your debt, and having errors removed on your credit report.
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Save for the Down Payment
The down payment will secure a home loan, making it important to save five to 20 percent of the value of the property that you purchase.
You’ll also need to save for closing costs, which are an average of $3,000 to $7,000 and cover the cost of title insurance, attorney fees, underwriter fees, appraisal fees, title searches, and the home inspection.
If you’re planning on building your own home, you’ll need to determine what you can afford and the overall cost of the project, which will determine the amount of your down payment.
Professionals at Hayden Homes recommend buying new so you get the perks you want up front and without the cost of renovations later.
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Secure Your Employment
Lenders approve applicants who have a steady employment history and have been working for the same employer for at least two years.
It’s important to avoid switching jobs or becoming self-employed to establish trust with the lender and prove that you’ll continue to have a steady income.
You also want to avoid taking a new position that pays less.
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Pay Off Your Debt
Your debt-to-income ratio is an important factor that determines your financial stability.
Reduce your debt-to-income ratio to under 43 percent to become approved for a home loan because it allows lenders to determine your ability to manage your payments.
Work to pay off your student loans, auto loans, and even credit card debt to ensure that you qualify.
When you’re ready to finance your first house, there are a few important steps to take when applying for a loan.
By taking the necessary steps and securing your finances, you can obtain the house of your dreams and find a long-term place to call home.
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