3 Things First Time Homebuyers Can Do To Improve Their Chances Of Getting A Loan
If you are a first time homebuyer, you are probably wondering what you can do to improve your chances of getting approved for a home loan. Mortgage lenders can be very skeptical of first time homebuyers and might make them jump through more hoops to prove their income than they would someone who has purchased real estate in the past. Here are some things that first time homebuyers can do to improve their chances of getting the loan.
1. Save More
When most people think about buying a house they think mostly about income and debt. Income and debt play a huge role in buying a house. They will use your debt to income ratio to determine how much house you can afford and your credit score to determine how much you pay in interest. But what most people don't understand is that your savings and your bank accounts will play a big role in if the banks want to lend to you.
Someone who has a good savings account, who shows that they have an emergency and rainy day fund, will be more likely to get the loan than someone who is living paycheck to paycheck. The mortgage lender will ask for copies of your bank statements for the last couple months, and that will help them see if you spend less than you earn and if you have a good savings.
2. Buy Lower Than You Can Afford
Another good way to improve your chances of getting a home loan is to buy lower than what you can actually afford. For instance, the banks will usually loan to you so long as you debt to income ratio is under a certain percentage. If possible, choose a house far lower than what they will allow for the debt to income. Buy at 17% of your income rather than 30% of your income, for example. This will make payments easier for you, as well as show the mortgage lender that you are less of a risk.
Similarly, only look at homes for sale that you know you can afford.
3. Put Down More On The House
For every dollar you put down on the house the less risk you are for the mortgage lender. Ideally you should be saving every penny years before buying the house so that you have a good down payment. This will make your payments on the house lower and will improve your chance of getting a mortgage.
By understanding these things you can make yourself a better candidate to get a mortgage.