Whether you’re a first-time buyer or you’re purchasing your 100th home (wow, right?!), here are three things you need to know before you apply for a mortgage loan.
3 Things You Need to Know Before You Apply for a Mortgage
Before you start exploring lenders, you need to know:
- What makes a good credit score
- How much of a down payment you should have
- What your debt-to-income ratio is
What Makes a Good Credit Score?
The higher your credit score is, the better terms lenders are willing to offer you.
A score of 750 or better is considered excellent, and 700 to 749 is good (and usually qualifies you for great rates). Fair credit is typically 650 to 699, and if yours falls in that range, you’ll likely have to pay higher interest rates than people who have higher scores.
Here’s a quick graphic on what lenders think of your credit.
How Much of a Down Payment Should You Have?
The more money you put down, the lower your monthly payments will be. Try to aim for at least 20 percent – but know that you don’t really need that much to buy a home. Many lenders and many loan types are designed for lower down payments (some as little as 3.5 percent). Even better for some buyers, VA loans don’t require anything down.
Related: What you need to know about VA loans
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What’s Your Debt-to-Income Ratio?
Lenders want you to have a decent debt-to-income ratio. That’s the amount of money you make versus the amount of money you have to spend each month, like your monthly credit card minimums. You need to know what yours is so you can lower it if necessary.
Related: How to calculate your debt-to-income ratio
Are You Buying a Home for Sale in Lake City?
If you’re moving to Lake City, we can help you find the perfect place to live. Call us at 386-243-0124 to tell us what you want from your home and we will begin searching right away.
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