There are so many steps, tasks, and requirements involved when purchasing a home but assessing your financial health is one of the most important aspects that you should really look into before anything else. It plays a huge role to the point where it can dictate what house you can buy. So ask yourself, can you afford to buy a house right now? What is your budget? What can you get within that price range?
There are actually several ways to assess your financial health. First, look at your savings. Go to bankofamerica.com login on their wesbite to check your savings account. This may be the most obvious one but it’s a great start! Make sure that your savings are enough to cover for the future and your ongoing expenses. Having an emergency fund is also a must. Some lenders actually require that you have one. Your emergency fund should be able to cover 3 to 6 months of living expenses.
Second, look at your spending. Know how much you spend in a month so you know how much you can use for your mortgage payments. When doing this make sure that you account for everything that you spend for. This will really help with assessing if you are truly ready to purchase a home.
Third, check your credit. This is an important factor that lenders look into when they decide how much mortgage you qualify for. This also dictates what type of loan you can apply for.
Loans are the next important thing to look into because you will mostly likely need it. Knowing what type of loans and how much loan you qualify for is a really important step. It will be easier to look for a house when you know your price range. Also buying the house is easier if you have a pre-approved loan. Here are important things that the lenders consider when they assess your financial health: your savings, how much debt you have, your monthly income, and how long you’ve been at your current work. Of course all this will be easier with the help of mortgage advisors. If you need assistance, consider working with one. A mortgage advisor can also provide other alternatives that will work best with your situation.
- Source of Income – the lenders have to be sure that you have a stable source of income so that they know that you are able to pay back the loan and the interest.
- Proof of Income and Employment – This is to prove that your claimed source of income is legitimate. These are documents that most lenders require. Along with this it is possible for the lenders to conduct a background check by calling your employer.
- Debt to income ratio – this is computed by adding up your monthly expenses and by dividing the sum by your gross income. This is also a good way for the lenders to assess if you can fulfill paying the loan back.
- Your credit score – A credit score is determined based on your borrowing history, which considers the available credit you’ve used. If your credit score has shown that you have a good history with your debts that’s a good sign for them. Some lenders require a high credit score and some accept lower credit scores. This will be determined by the type of loan you apply for.
- Down payment – Some leaders don’t require down payment and some do. Again this will be determined by the type of loan or the loan program you apply for. The lenders knowing if you have sufficient money to pay for the down payment is also important information for them.
It’s also worth it to familiarize yourself with loan types and programs so that you can find the best one suited for your situation. There are loan programs that are backed by the government, those types usually require little to no down payment and very little interest and there are loan programs by private companies or banks.
Your home purchasing journey will be easier and smooth when you are knowledgeable and know all the important information. Planning ahead also helps. Hopefully the things discussed in this article can help you with purchasing your dream home!
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