Who doesn’t dream of owning a home in the heart of America? In fact most Americans nurture the dream of homeownership but very few are able to realize it. If you too have the same dream of buying your own home and let go of the hassles of renting an apartment, you’re not alone as there are hundreds of people who are going through the same situation. Buying a home can become an intimidating and a daunting task if you’re not aware of the steps that you should take in order to grab a home loan within your means. Home mortgages are secured loans that you have to take out by pledging your home as collateral to the loan and hence if you fail to make timely payments on your home loan, you will run the risk of losing your real estate property to a forced foreclosure. Here are some vital essentials that you need to take into account while buying a home in the United States of America.

  • Give a glance at your credit score: The most important document that the mortgage lenders will check is your credit score. Your credit score is a 3-digit number that speaks about your financial health, the way you’ve managed your finances in the past and whether or not you have a good and positive record of making timely payments. If you have a good credit score, it is most obvious that this will imply that you’ve been regularly making your payments in the past. But when you have a poor credit score, this will speak against you and will therefore bar you from getting a new line of credit at an affordable rate. So, improve your scores before approaching a mortgage lender.
  • Repay debts to reduce your DTI ratio: Apart from the 3-digit credit score, the DTI ratio is something that is also checked by the mortgage lenders.  The debt-to-income ratio gives the lender a ratio between your gross monthly income and the total monthly expenses that you make from your income. The more is your DTI ratio, the lesser will be your chances of snag a mortgage within your means. Therefore, you should either pay off your debts immediately or look for ways to boost your income in order to lower your DTI ratio. Take this step before approaching a mortgage lender.
  • Save enough money for paying the exact money down: You should save enough money for paying down the exact amount while taking out the mortgage loan. The required down payment is 20% of the loan amount that you’re taking out and unless you pay down the exact amount, it won’t be possible for you to avoid paying the PMIs or the Private Mortgage Insurance payments. The insurance payments will unnecessarily increase your monthly payments and therefore you should try to avoid it by saving enough money for the down payment.

Therefore, when you’re all set to seal the deal with a mortgage loan, you should take into account the above mentioned points. Don’t forget to test your shopping skills by getting multiple quotes from multiple lenders as without this you might just end up with the wrong loan. Compare the interest rates, closing costs and monthly payments before choosing the final one.