There are plenty of things to consider before you buy a home, what kind of counter tops you want, how many bedrooms, and what size lot, but before you consider any of those thing its important to consider what your buyer readiness looks like. When purchasing a home, lenders looks at 3 major things, your credit score, your expected down payment contribution, and your debt to income ratio.

Credit, while being the most obvious consideration it is also one of the most important. Lenders are looking for good credit scores , anything between above 700 is generally considered to be a “safe borrower”.  However, just because your credit score is lower than that, does not necessarily mean you wont qualify.  With lower credit scores, comes an increase in interest rates, by how much is really determined by your credit! When your interest rate increases this also drives up your monthly mortgage payment. This is essential when considering your price point and what you will be able to afford monthly.

The next thing to consider is what you have as a down payment.  It goes without saying that the more money you have to put down, the lower your mortgage! Mortgage lenders typically like to see a down payment of 20% of the home, again this is not required, but there are benefits, one of which is not having Private Mortgage Insurance. This is something you would want to consider knowing that it would be an additional cost to your mortgage.

Lastly, your debt to income ratio. Having a job that pays you regularly is good, but it is not always enough. Lenders like to make sure that what you get paid will not only cover the costs of your other debts but also cover the costs of your mortgage.

The financial planning that comes with purchasing a home can be daunting and overwhelming, but knowing what lenders are looking for before you go in, can really make all the difference.

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