You find out that you’ve just received a nice pay increase and you're very excited and want to treat yourself and your family. You maybe buy a new high tech gadget, maybe some nice new clothes (or for women, then shoes!!!) or maybe even step up into a better car.
At some point thereafter a decision is made to buy a home or maybe you’re interested in buying a step-up home if you already own one. You research your market, find out exactly where you want to live, calculate what payment you would like and how much money you can afford to put down.
It comes time to speak to the loan officer who will then discuss with you the process for buying a home. They pull your credit, crunch some numbers and find out what you can qualify for. All of a sudden those extra purchases on the credit card and/or the new car have caught up. If only those purchases weren’t hanging over your head and you had more buying power from your raise.
When the loan officer calculates how much you can qualify for there is a factor used called your monthly debt-to-income ratio. This is how much debt you have going out every month divided by how much income you have coming in each month. The lower this ratio, the more money you have left over for a house payment. Remember when calculating your house payment, you will have to include taxes & hazard insurance and maybe private mortgage insurance (if your loan amount is greater than 80% of the value of the home).
If you have a choice, buy the house first and the car later.
No matter what your own financial situation maybe at this point, you should still speak to your mortgage professional so an evaluation can be done. That way you can be given advice on what steps you can take now to provide a successful purchase of your home in the future.
Tips Before Purchasing A Home
Whether you are a first time home buyer, purchasing a second home, investment home, have bad credit or bankruptcy
- No major purchase of any kind
- Do not move money around
- Do not change jobs
- Do not allow your credit to be pulled by multiple institutions!!!!
- Make deposits like you normally would - do not keep your money for the home under your mattress at home
- If you don't have a bank account, then open one