What’s the first and most crucial step when considering buying a home? According to a recent article on Trulia.com, it’s understanding your finances.
Want to really stand out to sellers? Sit down with a lender and get pre-approved for a mortgage. This puts you in a strong position and will make your offer stand out.
Other financial tips include:
- Know your credit score. Your credit score helps a lender determine your ability to pay your loan every month. While a low credit score doesn’t necessarily mean you’ll be denied for a loan, it will impact the quality of loan you’re offered.
- Cash is king. The ability to offer a strong down payment improves your buying power. A downpayment of 20 percent or more can eliminate the need for private mortgage insurance and allow you to negotiate a lower interest rate.
- What’s your debt-to-income ratio? Your lender will want to know because they want to be certain that you’ll be able to pay your mortgage in addition to all other outstanding debts.
- Organize your assets. Your lender will ask you to provide documentation of assets showing where money for the downpayment is coming from and what your current savings and investments look like. The bigger your cushion, the more likely lenders will think you can afford all mortgage costs and fees, and all other home-related financial obligations.