Buying a house is a monumental occasion and one that you should certainly look forward to with anticipation and excitement. However, according to the financial experts at Texas Lending, there are a few key indicators that you should wait before signing up for a first mortgage.
1. A disappearing down payment
According to Texas Lending mortgage professionals, many first-time homebuyers hopefuls don’t consider the fact that they will need between 3.5% and 20% of the property’s purchase price in cash at closing. Even at the lowest end, that is more than $10,000 on a home priced at the national average of $300,000. Those seeking a conventional mortgage will likely have to put down three times that.
2. Unconsidered closing costs
Closing costs can add up to between 2% and 5% of the total sales price, the professionals at Texas Lending point out. If you have not saved up enough for your down payment and the additional closing costs, you may need to wait another year. Closing costs are necessary and include everything from loan processing fees to property inspections and the cost of recording the new title.
3. An ailing credit score
Depending on which reporting agency’s data you look at, the average credit score ranges between 600 and 700 on a scale of 300 to 850. If your credit score is lower than 600, you may want to take some time to determine ways to increase that number to get the best rates. Most Texas Lending customers enjoy a much lower rate with a credit score of 750 or higher.
4. Unpaid bills
One of the first things the lender will consider before approving the loan is your debt-to-income ratio. In other words, how much money you owe each month in relation to how much money you bring in. If your debt-to-income ratio is higher than 36% of your pre-tax monthly income, you may not qualify for a loan. Texas Lending mortgage professionals suggest paying down credit card balances and other recurring and installment obligations in the months leading up to your home search.
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