Buying a Home
Buying a house can be a stressful experience, but we're here to help. These tips will help guide you through the home buying process from start to finish.
Determining How Much You Can Afford
Fewer than 10 percent of homebuyers purchase their homes with cash, so chances are you’re going to need financing. Most people can get a mortgage loan, but not everyone can get a good mortgage loan. The best way to get a low interest rate and to avoid a default later is to not borrow more than you can afford. These are things to consider:
Calculate Your Debt-to-Income Ratio
The general rule of thumb is that your mortgage payment should equal no more than 28 to 33 percent of your gross income. And your total debt (i.e. your anticipated mortgage amount plus your car loan, credit card balances, etc.) should not surpass 36% of your gross income.
Determine Your Down Payment
The larger the down payment, the lower your monthly payments will be and the less you'll ultimately pay in finance charges.
Here are some tips to help you make the most of your money and increase your borrowing power:
Don’t Deplete Your Savings
Lenders often look at your cash reserves. They don’t want you to empty your savings accounts in order to afford your mortgage payments. So avoid making other major purchases in the year you plan to buy.
Borrow with a Cosigner
You may be able to borrow a larger amount or get a lower interest rate if you borrow with a cosigner. Consider this option carefully. You will both be held responsible if you default on the loan.
Track the Current Housing Market
Look at the current buyers' market and interest rates. Are rates increasing or decreasing? The lower the interest rate, the more home you can afford.
Patch Up Bad Credit
Get a copy of your credit report from each of the three credit bureaus. Make sure that there are no mistakes on it that could cost you a higher rate or even prevent you from getting financing. Pay all of your creditors in full and on time for at least a year before you want to get a mortgage loan. And try to avoid changing employers. The better your credit rating, the more you’ll be able to borrow and at a better interest rate.
The Three Credit Bureaus:
1. Experian (888) 397-3742
2. Equifax (800) 685-1111
3. TransUnion (800) 916-8800
Gold Star Members Get Loan Discounts. Claim Your Savings!
It pays to use SVFCU for all your banking needs. Our Gold Star Members receive an additional ½% APR* discount on select loans just for using everyday services. The rates as listed include the Gold Star Member Discount on qualifying loans. Learn More