Buying a House will certainly find a top place in the preferential list of each and every individual.
Rather than a desire, it actually becomes our dream to own our own pretty house.
As youngsters most of them would have utilized the Student loan programs to complete their education and as they emerge out as graduates, that are laden with the repayment of those loans.
But being indebted doesn’t in any way stop their dreams of owning a house.
They keep searching for all possible ways and means as how they could buy a house and become proud owners of their own house.
There are a lot of factors that has to be given deep thought to before dreaming about buying a house. As a first time home buyer, you will have to analyze and follow some tips that would ease your process of buying a house.
Credit scores are one important decisive aspect that is considered while scrutinizing an application for loans or credits. The FICO score is the widely used credit score that is considered by most of the lender for approving a loan application. There are various ways by which you can improve your credit scores:
You can avail your credit scores by requesting for your free annual credit report. Also many mortgagers give provide you with your credit score for free if you apply for a mortgage. Apart from this there are a lot of paid services too.
Constant checking of your credit report is essential to fix any inaccurate information and update correct data’s.
A debt income ratio is the proportion of the customer’s monthly gross income that he actually spends toward paying his various debts that includes principal, taxes, fees, and insurance premiums all put together.
If the lender feels that your debt-to -income ratio is not so good, then your chances of getting approved for a mortgage loan are at stake. Even a superb credit track record, a handsome income and being an on-time payerwill all prove useless if your DTI ratio is poor.
Just as it is important to keep track of your credit scores, it is equally important and in fact more important to know your DTI, when you apply for a home loan. Although a good credit score gets you a low-interest loan, it is the DTI ratio, which decides if you are eligible for the loan.
The lender evaluates your DTI, to make sure that you are stable enough to make your payments on time for the proposed mortgage. The only way to improve your DTI ratio and make it look appealing in the eyes of the lender is to literally improve your earning figures.
While the above methods might improve your DTI ratio, it basically depends on the type of mortgage that you apply for that will decide your eligibility.
The debt-to-income ratio is one vital factor that affects the decision of the lenders while scrutinizing the application for a mortgage. Basically there are two types of DTI ratios:
|Formula for calculating front-end Ratio||Expected Housing Expense * 100
|Formula for calculating back-end Ratio||Expected Total Monthly Expense * 100
The Ideal DTI that is usually preferred by the lenders for approving mortgages is less than 28% front-end ratio and less than 36% for a back-end DTI ratio. These ratios are subject to variations depending upon your credit scores and income factors.
By doing a self-assessment of all your possible incomes and expenses, you might derive at an approximate DTI. You can get pre-approved by a by a lender by knowing the costs that are to be incurred while applying for a home loan. To get you pre-approved the lender usually checks upon your Credit score (FICO Score), your employment and your assets and liabilities. This will give a clear understanding of your credit-worthiness and your ability and home buying power.
There might be lot of questions pestering the minds of fresh grads about buying a house while having a student loan to pay.
Each individual would have various commitments and obligations with varying DTI. So the decision as to whether to go in for a new house first or pay off the student loan first depends on the personal and financial situations of the particular individual.
However buying a house while still having student loans would be still possible if the following factors favor you:
It is an undoubted fact that going in for a home mortgage along with having a student loan running currently will definitely increase your commitments and would pose many threats. You should be well assured that you would be able to overcome these threats and emerge out as successful debt-free individuals.
There are many lenders both federal and private who have wide options for fresh-grads who dream of buying a new house. But it is in the best interest of the individual to opt for a home mortgage or to finish off his student loans first.
It is always good to take advice from experienced persons and agents regarding the plans and procedures in buying a house and the various aspects related to payment of dues and installments.
Having your loan pre-approved by a lender will also give a clear picture about your financial position and also give a fresh view of your credit scores and your DTI ratios. This will also prove to be a self-evaluation of your financial status and will open up your thoughts and ideas about increasing your credit scores and DTI Ratios.
Always have in mind that the more information you gather for yourself, the more knowledgeable you will be about the total process and will lead to great stress reduction.
Adding to that your chances of finding a suitable house according to your needs with the best price will be more likely. You will not only become a proud house owner but also become a self-sufficient individual without getting into financial crunch.
So go ahead with your house hunt and find your dream home and make it a reality. Give a smiling start to your new house!