Money Tips for Buying a Home
By Darius Toston Moore
Regional Diverse Segments, Wells Fargo Home Mortgage
1. Know your credit profile: Your credit score may impact the interest rate or the amount of money you can borrow. Once a year, you may obtain a free copy of your credit report from each of the three credit bureaus at annualcreditreport.com; the official site for free annual reports. Having great credit is certainly helpful, but not required. Homebuyer education and home loan financing programs are making it easier for homebuyers with a range of credit scores or limited credit history to obtain a loan. Find more tips and free education resources at wellsfargo.com/financial-education.
When searching for a new home, you may come across some conflicting information; especially about home financing or mortgage loans. Consider these three money tips to help you navigate the process.
2. Manage debt: Another important factor mortgage lenders evaluate is debt-to-income ratio. A good rule of thumb is to keep your total debt level (taking into account the potential new mortgage payment) at or below 36 percent of your gross monthly income. Use an online debt-to-income calculator, like the one found at wellsfargo.com/goals-credit/debt-to-income-calculator.
3. Show them the money: A Wells Fargo survey found that more than a third of people believe you need 20 percent of the home purchase price to make a down payment. The reality is, some home financing or mortgage programs allow qualified homebuyers to put down as little as 3 percent. And for those who qualify for special mortgage programs – like military veterans or those purchasing rural properties, a down payment may not be required at all. You may also be allowed to use monetary gifts from family or friends for all or part of the down payment. In addition, there are various down payment assistance programs available through non-profit organizations and state and city housing authorities.