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Purchasing a home is a big deal. It's one of the largest investments you will make and you want to make sure you are doing everything correctly so your transaction goes as smoothly as possible. We want all of you to accomplish this feat, so we will be sharing with you today the 1st 5 steps to take when you decide to purchase a home. These 5 factors will greatly affect your buying power and what kind of loan you will qualify for when purchasing a home.
1. Get Pre-Qualified
This is always the first step when you purchase a new home. Go talk to your lender and get this step squared away first. If you need to get in touch with a lender, we have a list of preferred lenders that we know and trust to put you on the right path.
2. Credit Score
Before you go in to talk to the lender, be sure your credit score is in order. This is the first thing that lenders will pull. They take 3 scores from the 3 different credit bureaus, and usually take the middle score. Usually a credit score of 620 or higher will get you qualified to purchase a home.
3. Income and Job
Next, lender will verify that you have solid employment and look at how long you have been employed with your current company. They also look at how much money you make and determine whether it will be you alone or whether a partner or spouse will be on the loan with you. If so, they will take their income and job into effect as well.
4. Debt-to-Income Ratio
This is a key component in determining your purchasing power. If you have a high income, but high debt, you may not qualify. This ratio is determined by your annual income divided by your expenses.
5. Down Payment
This is an essential factor. Setting a lot of money aside is a great way to increase your buying power. If, however, you can't put a lot of money down, there are a lot of programs out there for you that don't require you to put as much down, even if you're a second or third time home buyer.