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Home Buyers’ Top Mortgage Fears

Home Buyers’ Top Mortgage Fears

Over the years, I’ve heard many potential buyer’s concerns about what it takes financially to purchase a home and have discovered that many of people’s mortgage fears are largely unfounded. Here’s a closer look at a few of the concerns I’ve heard along with some solutions.

Not having enough money for a down payment-Being able to assemble a down payment is often the most daunting concern among home buyers. Throughout my career I have encountered many people that think a 20% down payment is what it takes to get approved for a mortgage. While there is a benefit to putting more money down, there are many loan options that exist that don’t require that much down. Another option worth investigating is qualifying for down payment assistance. There are thousands of down payment assistance programs across the country that offer financial assistance and not just to first time home buyers.

Not qualifying due to poor credit- Lenders will check your credit score when you apply for a mortgage. Ideally, you’re on the higher end of the credit spectrum which will enable you to qualify for the best interest rates, but most lenders will still approve conventional loans for borrowers who have credit scores of at least 650. There are some mortgages that have less strict credit requirements such as VA and FHA. You should also bear in mind that credit is just one factor that affects the strength of your loan application. In fact, for most home buyers, your credit score is going to determine whether you’re able to get a great interest rate, not whether you qualify for a loan. If your credit is “on the fence” often lenders can identify what you can do to improve your score.

Not being able to make monthly mortgage payments-Foreclosures are on the rise and are a valid concern for home buyers—given the potential for an unexpected layoff. The best way to create a safety net is to build a solid emergency fund before you purchase a house. Experts recommend setting aside an amount that can cover six months’ worth of expenses, including your potential monthly mortgage payments. By having a sufficient rainy-day fund available, you’ll be able to continue making mortgage payments if you become unemployed for a few months.

Getting in too much debt-Having debt doesn’t automatically mean you won’t be able to qualify for a mortgage. What mortgage lenders care about is your debt-to-income ratio, or DTI, which compares how much money you owe (on student loans, credit cards, car loans etc.) to your income. For a conventional loan, most mortgage lenders require a borrower’s DTI to be no more than 36%. If you’re above the 36% ceiling, there are ways that you can lower your DTI. The easiest would be to apply for a smaller mortgage which means either lowering your price range or making a higher down payment.

In summary, the best way to ease concerns regarding your specific situation is to meet with a trusted loan officer so they can look over your financial situation and either approve you for a loan or put you on a path for future approval. Reach out to your preferred Realtor as they will have several that they can recommend to you, so you can realize your goal of homeownership.

Christina Brogna, Vice President and a Realtor® with RE/MAX Grupe Gold. Christina has over 12 years of Real Estate Experience. Information Provided from realtor.com.