These financial numbers directly affect your purchasing power.
When you decide to purchase a home, the list of things to consider can be daunting. Even though you’re comparing location and square footage, mortgage lenders are looking at specific numbers that make up your financial picture. Getting your finances in check help to improve your purchasing power so that you can get into your new home as soon as possible!
#1: Credit Score
Your credit score is one of the most basic and quickest ways a lender can determine your ability to pay for your loan on time every month. Five key factors influence your score: payment history, amounts owed, the length of credit history, credit mix, and new credit. Work now to perfect your score by combing through your report, lowering your debt, and not taking on any new debt. A score of 760 to 850 could land you the best interest rate possible.
#2: Down Payment
Credit score plays a larger role, but cash is still king in the home-buying game. The ability to offer a serious down payment improves your overall buying power the most. Putting down 20 percent or more of the total price can eliminate the need for private mortgage insurance (PMI), and allow you to negotiate a lower interest rate.
#3: Debt-to-Income Ratio
Lenders want reassurance that you’ll be able to pay your mortgage in addition to all other outstanding debts currently in your name. Not only will they want to ensure that your monthly mortgage payment is affordable, but that your current debt-to-income ratio has some flexibility to factor in more payments. As a general rule of thumb, your debt-to-income ratio should be at or below 36 percent.
While you’re perfecting your financial picture, take the time to search for a reliable escrow company. Let the professionals at Eastland Escrows handle your escrow needs. Visit us in Covina, California today to get started!
Eastland Escrow Inc. 