Pay down existing debt.
Your debt to income ratio (DTI) or, the amount of money you pay out each month versus the amount you bring in, is a very important metric when determining your eligibility to own a home. If your income remains the same, you can improve your DTI by paying off some of your debt to reduce or eliminate some monthly payments altogether.
Cut Your monthly expenses.
We know how it goes, but do you really need Netflix, Hulu, Disney plus, and HBO? Dig deep and scrutinize your bills, then cut out the unnecessary expenses to save yourself a little extra cash each month. This cost savings measure will not only lower your monthly “debt” and improve your DTI, it could also provide you with more savings each month that could go toward a larger down payment and further lowering your interest rate on a home loan.
Increase your income.
Whether it’s a new side hustle, asking for a raise, or going for that promotion at work — the more money you make, the more eligible you are for a loan. Lenders look at income to determine one’s ability to pay back a loan, and also to calculate the monthly payments you can afford. A higher Income = A Higher Loan Amount (= Better Interest Rate)
Improve your credit score.
Believe it or not, it’s actually a good financial move to have a credit card or two that you use, especially when it comes to buying a home. Lenders want to see that you are able to borrow (and pay back) outstanding debts. This is why your credit history and credit score are important. Two ways you can positively influence your credit score are making payments on time and keeping a low balance on your credit card compared to the amount available (less than 30% is ideal)
Build up your savings.
The more you are able to save and put toward a down-payment, the less risky you are to a lender. By saving some money ahead of time, you will not only be able to make a larger payment upfront toward your home and ultimately gain more favorable terms for buying, you will also have an overall lower interest rate going into your purchase and more equity in your home from day 1.
Whether you’re ready now, or 5-years from now, make sure to get in touch with us at Real Homes when you are ready to take that next step in the process — we would be happy to help you find a home!
- Standard Features
- Our Building Process