Buying real estate is one of the biggest milestones a person can achieve. To some, it might be easy-peasy-lemon-squeezy, but to others, it is a big deal. Not everyone has the privilege to buy a home, but if you are at that point of your life where you can afford it, congratulations! The first thing you need to know is that buying a home is a serious business. There are many aspects to it.
One is deciding which house to pick; there are so many to choose from, but it can be difficult because of the many things you should consider such as the overall aesthetic of the house, the facilities, and the faults as well. If you don’t look closely, you might regret buying what you thought you wanted.
Two is the competition. Buying a house isn’t like picking an apple from a tree. If you’re interested in a home, you are most likely in a competition with someone who is also interested. Make sure you think and act fast. Otherwise, your dream home might get taken away from you. Third, are your payment options.
If you’re one of the lucky ones that can pay full in cash, then good for you! But for the rest of us, home loans are our best bet. The other problem is choosing the best home loan for you. This article tackles everything you need to know. Read more via homelendingpal.com.
Unless you’re lucky enough to pay full in cash, then a home loan is something that you should consider when buying your dream home. The first thing to note is to make sure that your home loan is within your budget. The fact here is that you will be paying either monthly or annually for years to come, so picking the right home loan is important. Here are a few things you should consider before getting a home loan:
1. Know what you can and can’t afford
It is important to note that getting a home loan is serious business. Before you qualify, you should know what you can afford. You will be paying your mortgage for a few years, so before you sign anything, make sure you can pay what you owe. You can find out if you can afford a home loan by checking your DTI or debt-to-income ratio which allows you to identify the percentage of the income you are spending each month. A company like Altrua Financial can help you navigate what you can afford!
2. DTI or Debt-to-Income-Ratio
To pre-qualify for a home loan, you need to improve on your DTI. Increasing your income can prove that you are eligible for getting a bigger loan. Either make a way to show that you can make more income, or get a high-paying job that can provide you with an income that can pay your loan. and the more obvious answer is to lessen your debt. Make sure that before you apply for a home loan, you have little to no debt in order to pay for your mortgage.
3. A better credit score
You’ve heard about credit scores, now it’s time to have a good one. Showing that you have a good credit score can possibly give you a bigger home loan. It’s simple; a good credit score means a better interest rate. A better interest rate means saving more of your money. How do you achieve a good credit score you ask? Well, it’s easy, and the answer is right above this paragraph right here: pay your debts.
4. Down Payment options
If you can’t get a bigger home loan, then another thing you should consider is paying a higher down payment. This may feel heavy at first, but if you really want your dream home, then you better save up for a downpayment. The plus side of paying a downpayment is knowing that you have less mortgage to pay off in the future.
Now that you know what you need to know before getting a home loan, it’s time to look at your options. There are so many home loans available that cater to your needs. You just have to pick wisely. Again, home loans are serious business. So take it seriously. Loans aren’t created equally. Each loan has different guidelines, downpayment percentages, and more. As this article has mentioned, to get a bigger loan, one must have good credit. But do not fret, there are other home loans that are suitable for those who feel like they won’t be able to achieve that. Here are a few home loans that you can choose from:
The conventional loan is the most popular and most common home loan. This is because of how accessible it is all over the country.
Who is eligible?
- Borrowers with good credit
- Those who have a stable income
- Those who have the ability to pay for a 3% down payment
- Available for properties such as: primary, secondary, vacation and investment properties
- Those who are able to pay for up to 10 to 30 years
- Those who are able to pay a 20% downpayment to avoid paying for private mortgage insurance
Conforming Mortgage Loan
These types of loans have limits set by the government. The conforming loan limit for 2023 set by the Federal Housing Finance Agency is $548,250 for one property.
FHA Home Loan
An FHA home loan is popular amongst first-time homeowners. The best part about this home loan is that one doesn’t need a high credit score in order to qualify.
Who is eligible?
- Those who are able to pay for a 3.5% down payment
- Those who have a low credit score
- Those who are able to pay for 15 to 30 years
This home loan is targeted at those who want to live in rural areas. They are most likely low-income to moderate-income buyers.
Why choose USDA Mortgage?
- There is no down payment requirement
- Low insurance fees
Government Insured Veterans Affairs
The VA loan is a home loan made especially for those who have been of service to the country, such as military service members and veterans, including their family.
Pros of the VA loan
- There is no down payment required
- Few closing costs