Are you thinking of buying a new house but wondering if you can get approved for a mortgage?
The good news is that there are a LOT of different types of home loans for many different types of homebuyers. And there will likely be something that works for you, too.
With all our experience in Michigan real estate, we thought it might be helpful to give you an overview of what factors into whether you’re able to get approved for a mortgage or not.
Here are factors to keep in mind.
Down Payment Size
The larger your down payment, the easier it’ll be to get a loan and the better interest rate you’ll get. A 20% down payment is ideal, but that is often a very big dollar amount. There are loan types aimed at first-time homebuyers and others that require a MUCH smaller down payment.
Unsurprisingly, lenders will also look at your credit history. Your FICO score is a major factor in determining your loan eligibility and interest rate. It’s a matter of risk: The higher your credit score, the more likely you are to pay back the loan, and the lower interest rate you’ll get. If your credit is questionable, lenders feel they are taking a risk on fronting you so much money, and your interest rate will be higher to protect them from loss.
Lenders want to make sure that you’ll be able to afford to make your monthly mortgage payment consistently, and so they also want to see a long-term, reliable work history without big gaps in income.
The debt-to-income (DTI) ratio examines how much of your income is going toward paying off debt. Generally speaking, lenders try to avoid lending money to applicants above 43% DTI. If yours is higher, work toward paying down credit cards and other debts if possible.
Type of Loan
There are many different types of loans for many different budgets and types of homebuyers. Do your research to make sure you understand the differences between conventional, fixed rate adjustable rate, FHA, and other types of mortgage loans. Ask the lender about all your options before making a decision.
Hope that helps!
Now, if you need to sell a property in Michigan, give Mitten Made Properties a call at (248) 883-3340 — we can make you a fair cash offer, buy as-is, and close in as little as two weeks!