It is common knowledge that one of the most important aspects of successfully securing a home loan is the maintenance of credit scores and debt management. Although they are not the only factors pertinent to obtaining a home loan, they are quite significant for the entire home purchase process.
FICO Scores demonstrates to lenders the strength of a borrower(s)’ ability to repay the loan. FICO scores tend to increase as a result of borrowers paying their creditors in a timely manner. The higher the FICO score, the higher the lender will trust the borrower with a loan. Therefore, it is advantageous for the borrower to increase one’s FICO scores in any way possible. In addition, those with higher FICO scores tend to be granted with lower interest rates because of the decreased risk to the lender, thus, saving them a greater amount off of their monthly mortgage payment.
Amongst other criteria, lenders also place a greater emphasis on a borrower(s)’ overall debt to income ratio. Average lender guidelines stipulate that a borrower(s)’ debt to income ratio ought to be between 45-50%.
Because preparing to purchase a home is not instantaneous for most people especially with today’s stricter lender guidelines, buyer(s) must take the time to get ready for that glorious day when they are able to close escrow on the home of their choice. It is best to set aside 6-12 months for preparation to buy a home especially if the buyer is aware of any credit and/or debt challenges. Once the prospective buyer has decided to embark upon homeownership, their first step should be contacting a Realtor who can assess their situation, offer them the resources necessary to improve their chances for owning a home and direct them towards an appropriate plan of action.
The next step for a prospective buyer is to gain a credit analysis from a respective loan consultant like Angela R. Lamb, Broker of Gshloans, LLC. The loan consultant will be able to define a current budget, price limits, as well as offer the buyer alternatives based on scenarios that may require a higher FICO, lower total debt ratios or the need for a down payment. This step is crucial because it determines whether or not the buyer can even get financing for the home purchase. The sooner that the buyer(s) can obtain a credit analysis, the quicker he/she can establish a clearer time frame as to when he/she will be able to successfully close escrow on their new home.
When less than desirable credit scores or debt issues are stumbling blocks for the buyer, it’s a great service when his/her Realtor and Loan Consultant are able to provide a legitimate solution to the challenge. To avoid future inconveniences, buyers need to consciously choose their “TEAM” for greater success on their journey to homeownership.
In today’s real estate market, homeownership is no longer as easy as it was during the ‘boom.’ Therefore, buyers must get saavy and discover ways to make themselves more attractive to lenders who become extremely critical of buyers in general.