Getting a mortgage in Colorado Springs is not as easy as people think. According to one report, only 37% of first-time home buyers can pay the 20 percent down payment required. That means 63 percent of potential home buyers in Colorado Springs have some work to do!
It’s no accident you’re reading this article. You’re looking for more creative ways to be a better home buyer, especially when applying for your first home loan. Read on for the most practical ways to qualify for a mortgage in Colorado Springs and anywhere else in the country!
— Your credit reports and scores are of the utmost importance. These data signal financial institutions whether you’re good or not good for the money they might lend you. Experian provides free credit reports, so it’s best to start there.
— Check your debt-to-income (DTI) ratio as well. This is another indicator for financial institutions to see if your income falls within the means to pay off your mortgage plus interest.
— The best rates are for your housing costs to fall 28 percent below your gross income and monthly debt payments below 36 percent of your gross income. Any higher means your finances are stretched too thin, even for a new home loan.
— You still have options for consideration, even with low credit scores. Good scores are from 620 and above. If it falls below that number, you can still get good mortgages with bad credit through the Federal Housing Administration (FHA), which offers only a 10 percent down payment on their loans! However, keep in mind that a low down payment usually means high-interest rates. While you’re paying much lower initially, they’re to make that up over time through interest.
— Immediately deal with solvable concerns. For instance, if your DTI is high, pay off some debts to lower them and make you even more qualified for a loan. A mortgage is a significant expense, so you and your spouse must prioritize what kind of debts to finance.
— Get your documents in order: the prequalification and the preapproval. The prequalification shows you an estimate of how much you can get for the home loan but doesn’t allow you to borrow yet. That’s where the preapproval comes in with the actual application and supporting documents like the credit information.
— Other supporting documents you may need in your pre-approval may vary according to the financial institution. However, here are some they may ask for: pay stubs, W-2s, bank statements, tax returns over some time, other valid income documents, debt information, and copies of government-issued IDs.
— Don’t just get one pre-approval for a mortgage. Shop for many! That way, you have options depending on which ones fit your budget. Variables to consider include interest rates, terms, and customer service.
Other Factors to Consider
— Mortgage insurance assures financial institutions protection for their investments (in this case, lending you cash) if you cannot complete the loan. You’ll need to prepare for this, especially if you’re applying for an FHA loan with a downpayment of less than 20 percent. It only costs between 0.5 percent and 1 percent of your loan amount and will secure your cheaper home loan.
— On the other hand, homeowners insurance protects your investment (in this case, your actual home) from artificial and natural disasters. While it costs around $35 for every $100,000 of a house per month, it’s a worthwhile cost to take on, especially if you live in an area where various perils occur.
One Last Thing
Once you own a home, there are still property taxes, homeowners’ association fees, and repair costs to deal with to maintain your house’s quality. This is why securing the right kind of home loan is essential to ensure all your finances are not spread too thin so you can still enjoy a financially-stable life.
Need help selecting the best kind of home loan in Colorado Springs for you? Get in touch with our experts at Total Lending Concepts today! We help you search for the right type of mortgage, be it conventional, VA, USDA, FHA, or other types that fit your needs. Reach out to us right now, and we’ll show you how a mortgage with a little TLC feels like!