4 Different Ways to Afford a Home Loan

It can be tricky to figure out how much of a house you will qualify for, but it makes the whole process more manageable if you have a reasonable budget in mind. While essential factors like income are always considered when applying for a mortgage, there are a few options for finding a solution that works best for your financial situation. Here are four options that will help you decide which way you can afford a home loan.

1. You Are a First-Time Home Buyer

First-time homebuyers can qualify for down payment assistance and can take advantage of grants and other state programs that help lower your monthly payments. If you are buying a home for the first time and ready to stop renting, you don't want to miss out on any chances to save money. Typically, you can only use these types of loans once, so be sure you use it wisely. Aside from your first home buying experience, there are also low home mortgage rates for veterans and active military families. These are all details that you should talk about with your mortgage professional to help you get the best price and lowest interest possible.

2. You Have a Great Credit Score

If you have a great credit score, you will qualify for the best rates from lenders. Your scores are a huge component in determining how much you will pay in interest over time and what amount of down payments will be required. An excellent credit score stems from having a solid payment history and a low debt-to-income ratio over the span of many years. Monitoring and working on your scores is monotonous, but when it comes to buying a house, your efforts will be well worth the trouble. It is still possible to obtain a home loan with less than average credit, but it helps make these numbers a priority before thinking about a loan.

3. You Can Offer a Large Down Payment

Suppose you are dealing with credit difficulties and are unsure about how you could get approved for a mortgage. Offering a sizable down payment will combat your weaknesses in the credit department by lowering the loan amount and saving you money every month on private mortgage insurance. Most lenders like to see at least 20%, and if you were able to put even more down on your loan, you increase your chances of getting approved. As an example, a 20% down payment on a $200,000 house would be $40,000. If you are moving from a home that you have owned for quite some time, there is a good possibility you have quite a bit of equity to apply to your new place. Also, a substantial amount down equivocates to earning equity in your dream home much more quickly.

4. You Are Paying in Cash

A cash offer means more money in a seller's pocket, so you have a leg up on any competition if you are not using a bank. When the housing market is booming, it is customary to come across bidding wars and homes with multiple offers. A homeowner has the power to decide which offer they would like to accept, and a reasonable cash offer is hard to beat. You may also be able to purchase a new home for less than market value by using a cash transaction, but you want to be sure to respect the seller's listing price. In summary, if you are paying cash, you don't have to worry about credit qualifications or interest, and you may be able to get an excellent deal on the property you like the most.

Each hopeful homeowner has a different financial situation, which is why there are many avenues you can take to purchase a home. If you don't fall into any of the more typical circumstances, talk with a mortgage lender to see what can be done to get you into a house.