Five Ways to Prepare for the Home-Buying Process

 Next to saving for retirement, purchasing a home is one of the most significant financial events for most Americans.

By  Viola Solomon

Turning a house into a home is easier when consumers are financially prepared.  Being prepared includes understanding what’s expected for loan approval and what’s needed for sustainable homeownership. Here are a few things that prospective homebuyers can do to get on the right path to homeownership: 

1) Know your credit profile – Prospective homebuyers should know their credit scores before applying for a loan. A borrower’s credit history may impact the interest rate or the amount of money that can be borrowed in relation to income.  Once a year, you may obtain a free copy of your credit report from each of the three credit bureaus by visiting www.annualcreditreport.com. To learn more about understanding and improving credit scores, visit the Wells Fargo Smarter CreditTM center at www.wellsfargo.com/smarter_credit. The site has great information on establishing, improving and protecting credit, as well as tips on paying down debt. 

2) Have manageable debt An important factor that lenders evaluate is debt-to-income ratio, which is the relationship between income and expenses. While debt-to-income requirements vary by mortgage programs, a good rule of thumb is to keep your total debt level at or below 36% of your gross monthly income.

3)  Show funds for a down payment – In the current mortgage environment, a down payment is required for most loan programs. However, a 20% down payment is not mandatory, and some loan programs provide lower down payment options. Keep in mind that some low down payment programs may require private mortgage insurance, which adds to the monthly payment and overall loan cost. 

4)  Demonstrate proof of all income – Borrowers must demonstrate their ability to repay and provide documentation of income sources. Lenders will review income history and will require current W2s, tax returns or other documentation.

5)  Have some money in the bank – In addition to showing an ability to make your monthly mortgage payments and other financial responsibilities, lenders want to see that you have savings or a cushion. Some call this cushion a “rainy day fund,” which can be used to handle unexpected expenses that come with home ownership, such as a leaking roof or a failing appliance. A good rule of thumb is to have savings for at least six months of expenses. This illustrates to a lender that you are financially responsible and capable of putting money aside.

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Old Fashioned Banana Pudding Ingredients 2 cups sugar, divided 1/2 cup all-purpose flour dash of salt 4 large eggs separated 3 cups milk 1/4 cup 1/2 stick butter 2 teaspoons vanilla extract 1 (11-ounce) box vanilla wafers 4 bananas sliced

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Houston Baby

january, 2021