Going from a renter to a homeowner is usually the best thing you can do for your future. You can be building equity in a home instead of having an expense each month that is simply gone. It may seem a simple thing to start the process of buying a home by going with the same budget you have now. If you are paying $X in rent each month, then you should be able to pay $X for a mortgage payment, right?
Actually, that is far from being the entire picture, as a lender will look at many things to determine what they are willing to lend, and it may not be anything near what you feel comfortable borrowing. It could be much higher, which doesn’t mean you have to borrow that much, or it could be much lower, making buying a home a bit more challenging. You also have to consider that with home ownership comes added expenses. As a renter, you haven’t had to pay for repairs, maintenance, taxes or insurance like you will as a homeowner, so be sure you are budgeting for these.
Your lender will be looking at your credit, but also some important ratios you should become familiar with – namely your debt-to-income ratio, total debt ratio and housing ratio. They want to see that you have enough left after paying debts each month to cover essentials, such as clothing, food, and transportation. The expectation is that if you fall short, you can’t go without the essentials, so your mortgage payment could be an issue instead. They also want to see that your total debt is not out of line in relation to your gross income. Finally, your housing-related expenses must fall within their underwriting guidelines, typically about 30 percent.
Once you have determined your budget and perhaps even been prequalified, it is time to continue with the process of buying a home. Ian Hawkins & Cindy Ryerse are ready to show you properties that meet the criteria you have while keeping within the mortgage payment you and your lender are comfortable with. We walk you through the entire process of buying a home, so you can enjoy the experience and get the desired results. Soon you’ll be on the path to a home of your own that starts with the excitement of knowing it is financially within your grasp.