By: Jerika P – i-Lead Realty Social Media Manager
When purchasing a home, one of the first steps should be to consider the specific factors that will help determine your homebuying power. Homebuying power depends on various things such as credit, income, assets, down payment, debt-to-income ratio, and other available resources.
1. Credit Credit
Is an essential factor that can also factor into one’s homebuying power. It is beneficial to have a good credit score of at least 700 to be approved for a loan; the better the credit score, the better the loan terms. Loans without a good score will have higher interest rates and be harder to approve.
2. Income Income
Is another major factor in one’s homebuying power. Generally, lenders like to see that you can commit about 28 percent of your pre-tax monthly income towards a mortgage payment. Thus, the more you make, the more homebuying power you may have because you could qualify for larger loans. Assets can also provide the additional financing needed to purchase a home. Lenders usually prefer to see funds available in checking accounts, savings accounts, or investments. Showing enough money in reserves after the closing to provide two months of mortgage payments may help you qualify for larger loans.
3. Down payment
Down payments are another major factor in one’s homebuying power. Most lenders require as little as five percent of the purchase amount as a down payment, while others may require up to 20 or even 30 percent. The larger a person’s down payment, the less money they must borrow and the better loan terms they could qualify for, thus giving them more homebuying power.
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