“I want to buy a house, but I’m not sure if my credit is even good enough to qualify.”
As a real estate agent, I hear this almost every day.
Most of the time, this fear is driven by two factors:
- Potential embarrassment of not qualifying for a mortgage
- Being confused on how the loan process really works
Let’s start with number one.
This is a very real fear! If you’re secretly afraid of not qualifying for a mortgage because your credit isn’t perfect, YOU’RE NOT ALONE. You have nothing to be ashamed about! Many of my clients didn’t have perfect credit when they started, but they were able to quickly repair their credit and qualify for a home after making a few simple changes.
(If you’re not sure if you might qualify, take the HomeBuyer quiz. It’s a short 16-question quiz that takes less than five minutes to complete. It’ll help you figure out if you should buy a home.)
So, again, do not freak out about your credit. Your credit score is not set in stone.
To buy a home, you’ll usually need a credit score of at least 600. The average homebuyer has a credit score of around 650-700. Don’t let this scare you—if your credit score is less than that, we can “repair” it. Sometimes it takes a couple months to repair your credit score, but sometimes it takes just a couple weeks! It completely depends on your specific situation.
If you don’t know your credit score, the fastest way to find out is to take the 16-question HomeBuyer quiz. Once you’ve taken the quiz, I can connect you with a loan officer who can help you find out your official credit score. You can take the quiz here. It usually takes less than 5 minutes to complete.
Besides your credit score, the other factor to consider is your debt-to-income ratio. This is how the bank will determine if you can actually afford to make the mortgage payments.
Usually, banks don’t want your ratio to exceed 45%.
This means that your monthly payments cannot exceed 45% of your monthly income. For example, if you’re earning $36,000 a year (which is $3,000 per month), your mortgage payments cannot exceed $1,350/month.
For most people, this shouldn’t be a problem. If you are looking for houses that would exceed a 45% debt-to-income ratio, in my opinion, those homes are probably out of your price range! The only solution would be to make a larger down payment, which would reduce the monthly payments.
In general, it’s not a good idea to have almost half of your income go towards a mortgage payment!
You need to make sure you are leaving enough margin every month for things like going out to eat, groceries, insurance, clothes, college savings, retirement accounts, etc.
Don’t spend all your money on your mortgage payment! If that means finding a better value on a smaller home, then so be it. It’s better to be safe than sorry.
You’ll be a much happier person if you aren’t nervous every month when it comes time to pay the bills.
If the first reason is being embarrassed about their credit, the second reason homebuyers get nervous about the loan process is simply confusion. They aren’t quite sure how it all works.
Here are some common questions…
Who do I call? The real estate agent, or the bank?
How do I find out my credit score?
What will my mortgage payments be?
Will I need to save a bunch of money for a 20% down payment?
Buying a home can seem overwhelming. Many people stress out when they hear about all the paperwork involved. But, really, it’s not that complicated! Your loan officer will handle most of that “stuff” for you.
The most important thing to do right away is to figure out what price range you can afford. Do NOT begin looking at homes until you’ve done this!
To get started, I recommend taking the 16-question HomeBuyer quiz. Your results from the quiz will help you determine if you should buy a house, and if you can, how much of a monthly payment you can afford. Once you take the quiz, I’d be happy to connect you with a loan officer that will get you pre qualified for a mortgage.
I hope this article was helpful! If you have any questions about the real estate market here in El Paso County, feel free to email me at firstname.lastname@example.org, or text me at (719) 393-3633.
Happy house hunting!