Sure You Make Enough Money, But Can You Afford a Home Loan?
Some buyers are finding out the hard way that, when it comes to real estate, it’s not always just what you make.
Recent reports show that the median combined family income in the Santa Clarita Valley hovers around $84, 000 per year. With interest rates hanging in the low 3 percent range, even with the median price of houses being what they are, it’s not out of the question that any individual or couple in this income range should be able to afford a home in the SCV.
Now, while mortgage lenders may take into consideration your gross monthly/annual income when deciding what your loan qualification amount may be, there are still other factors that help to influence their decision.
Your credit score may be good, but…
Of course, the first item a mortgage lender may look at while determining your loan qualifications is your FICO score. If you’ve ever obtained credit, there’s a good chance you already know what a FICO score is. If not, click here to refresh your memory. Of course, the higher the credit score, the lower your risk appears to a lender. But let’s say you pay all of your bills on time, yet your FICO score isn’t as high as you think it should be. Let’s take a look at a few reasons why this might be:
- You pay your credit cards on time, but you’re only making minimum payments.
Making only minimum payments means that most of the money you’re paying monthly is going toward interest, with a minimal amount actually going to the credit balance. This may raise a flag for lenders.
- You’ve made attempts to open too many lines of credit in a short period of time, resulting in a number of credit inquiries.
A multitude of inquiries into your credit history is also an indicator to a lender that you may be a high credit risk.
- The total amount of credit you owe is high in relation to the total amount of credit you’ve been granted.
Your credit owed should be 30% or less of the total amount of credit you’ve been granted.
Even if your credit score is good (Or even okay), what’s your DTI?
DTI, or Debt-to-Income Ratio relates to your total credit and rent expenses in comparison to your monthly gross income. Some lenders will accept a DTI as high as 42%, but for the best rates possible, you should try to get it down below 30%.
Cover Your Assets
Available cash on hand in savings, stock options, trusts, and accessible accounts are important facets of obtaining the best rate and loan amount possible.
So what can I do if my finances aren’t quite organized?
Contact me for a free, no obligation consultation and I’ll put you in touch with lenders who will help you put a plan together that will proactively help you get qualified for the home loan you want.