How to Afford a Home in 2019
Your Down Payment
Before you can purchase a home, you’ll need to have a down payment ready. Most conventional loans will require 20% of the home price in order to avoid private mortgage insurance (PMI), but don’t panic - there are many loans that will let you purchase with a much lower down payment. FHA loans require a minimum down payment of 3.5%, and some conventional loans may go even lower (but will include PMI); there are even programs that will let you buy for $0 down (such as veteran VA loans). To find out more about available loans programs and their requirements, don’t hesitate to reach out to us.
If your budget is tight, you can save for a down payment by putting aside your tax return, a job bonus, or just planning to put away a small amount each month. Financial gifts from someone else, like a family member, are also fair game for a down payment - as long as you have the proper documentation.
Your FICO Score
The better your score, the better your rate. For example, FICO reports that a credit score of 760 or higher, will qualify you for a 3.86% rate on a $216,000 30-year, fixed-rate mortgage (a $1,014 payment, not including taxes or HOA fees). A score of 650, on the other hand, will hike the rate up to 4.9% - and your monthly payment for just the loan up to $1,147.
A great way to improve your score is to stay current on all your bills and payments to avoid any late payments on your record. Reducing any credit card balances can also help improve your score.
Your Other Loans
Speaking of credit card debt, any other loans you currently have will contribute to how qualified you are for a mortgage. The more debt you have, the higher your debt-to-income ratio (DTI) will be; this, a higher ratio, in turn, will make you less eligible for a mortgage. If you have a lot of other loan payments, consider refinancing or paying off some of the debt if you can.
Whether it’s the loan type you choose or the mortgage company you work with, each will offer something a little different. Don’t hesitate to shop around for best options for you, whether that means the most affordable monthly payment or the lowest down payment possible. If you need advice on where to start, always feel free to contact us, your local real estate team.
loans.usnews.com (“FHA Loans”)
usatoday.com (“How You Can Afford To Buy a House”)