More and more prospective homebuyers are getting interested in entering the market because of the improvement in the economy. However, in this post-recession realm, there are a lot of individuals who wants to file for mortgage that are having a hard time navigating because of a more stricter requirements in applying for homeowner loans or successfully filling for another try after they have been turned down.
According to Mike Sullivan, a director of education for Take Charge America, which is a national nonprofit credit and housing counseling agency that “Many individuals and families are ready to pursue their dreams of homeownership after overcoming financial struggles, but they don’t always have a clear picture of what it takes, or how a mortgage could impact their long-term financial picture.” He also added that “The more knowledge they obtain before entering the lending process, the better.” With that said, more and more people will be considering homeowner loans or any type of loan.
There are different kinds of mortgage available for a lot of eager homebuyers. In UK, banks are offering loans in order to assist those individuals and family who have dream of owning a comfortable dwelling place.
Mr. Sullivan even explains three factors that prospective homebuyers should take into account before getting into any application for mortgage:
- You Have To Build Your Credit – There are many young people these days that haven’t been to any form of credits aside from student’s loans. In this case, lenders are having a hard time assessing their capabilities to pay back any home loans. Those individuals who belong in this bracket should start building positive credit lines or history. This includes having a good credit record on credit cards, auto loan and signature loan for at least two years before they try to apply for a mortgage loan.
- You should avoid a “House Poor” Lifestyle – There are a lot of homebuyers that assumes that if they will be approved for a loan, they can afford a house. The lenders approval rate is 31 percent of the gross income for a home payment and around 43 percent for other debt services; it is really easy to own a house you can’t afford. One must keep in mind that mortgage is only a part of the entire financial picture. There are still ongoing costs that need to be considered like the commuting, utilities, landscaping, general home maintenance and HOA fees. In this case, limiting the payment for 28 percent of the gross income and not more than 34 percent in other debts will be a great consideration.
- You Need to Evaluate Your Cash Flow – One of the reason why a lot of individuals are being turned down in their mortgage loan is their cash flow. The minimum requirement that a borrower needs is a 3-percent down payment and $1,500 for the closing costs. They also need to take moving and ongoing maintenance costs in all accounts including the appliances, utility deposits, curtains, lawn mower and other miscellaneous expenses. According to the general rule, the prospective homebuyers must have at least $10,000 saved before they go for their plan of buying a home.