Working to get a home loan can be an exciting time of life. Many people look forward to the day when they will be homeowners and have a place to call their own. However, the process of getting a mortgage has become more and more difficult over the years. The banks and brokers want to ensure that, before they take a risk on you, you are able to cover your end of the bargain, so they take you through a rigorous process. Here are some things you need to know about applying for a mortgage.
1. Have A Good Savings Account
Many people think that the most important part of buying a home is the down payment. Although that is important and the banks will look more favorably on the person who has a down payment, they also want to see that you have an emergency fund.
This emergency fund is your savings account. Your savings account should have at least a couple months worth of expenses that you can pull from if you fall on hard times. If the bank can see that you can afford to pay your mortgage, even if you lose your job, or if some catastrophe happens, then they will loan to you.
2. Buy Your Home, Then Your Car
If you are thinking of upgrading your lifestyle by purchasing a car and a home, buy the home first and then the car.
First, it is much easier to buy a car than it is a home. When you are applying for an auto loan, they will look at your debt to income ratio and your credit score and that is generally it. They will also loan to you, even if the payments put you a little higher on the debt to income scale. However, with a house, they will not be as accommodating. If you can't pay the payment for your car they just take it back. If you foreclose on a house, it means that they could lose a great deal of money.
Second, when you purchase a car, it will raise your debt to income ratio, making it hard to get the house. When buying a house, lenders have strict boundaries that they want you meet; for instance, they want all of your debt to income to be under 36%. Buying a car has more flexibility. This is why you should buy the home, then by the car.
By doing these two things, you can improve your chances of getting a home loan. Talk to a company like Realty in Alabama for more information on buying real estate.
