If you plan on buying a home in the summer, you’re not alone. The summer months typically see a spike in home sales, as well as available inventory.
Thankfully, this year is on track to be no different. Even with the current pandemic throwing a wrench into many aspects of our daily lives, the housing market remains stable, and interest rates are still low. With these factors in mind, potential home buyers are in good shape to make moves.
In this blog, we’ll outline how to get a mortgage that works best for you and make your summertime home purchase a successful one.
Ready? Great—let’s get started.
Learn your debt-to-income ratio (DTI)
Your DTI is the ratio between your debt and your income. It distinguishes how much you owe from how much you earn.
Ideally, borrowers should have low amounts of personal debt while earning an income, enabling them to support their mortgage. Still, a high DTI doesn’t necessarily bar you from being able to borrow. Your mortgage broker and loan officer can walk you through your options—you may have more choices than you think.
In the meantime, here are some financial realities you may wish to consider before getting a mortgage and buying a home in the summer:
- Student loans. Carrying educational debt doesn’t automatically exclude you from getting a mortgage. However, it can affect your DTI, which can impact the kind of mortgage you may get. For more information, check out our blog post on getting a mortgage with student loans.
- FICO Score. The FICO score helps calculate DTI. Speak with a mortgage broker about any outstanding credit card debt, as well as strategies for reducing and managing the debt you currently have. This will make it easier to obtain and sustain a mortgage that meets your needs.
- Co-borrower’s credit. If you are taking out a mortgage with another borrower, be sure to get a complete picture of their finances and DTI. Even though you are two distinct borrowers, you will be receiving one mortgage and one monthly payment. Everyone involved must be able to meet the terms of the loan.
- Reduce current expenses. Lowering your monthly payments isn’t just a good idea when preparing to get a mortgage; it’s also a good habit to carry over into your new life as a homeowner. Develop a monthly budget to lower your expenses, so you can better manage the responsibilities of homeownership.
These are just some of the things to consider when getting your DTI in order. Speak with a mortgage professional about how to manage any debt, so you can borrow successfully.
Get pre-approved for a mortgage.
Unless you’re buying in cash, mortgage pre-approval letters are strongly recommended to partner with a licensed Realtor. Some real estate agents will not even entertain working with a client unless they have a letter stating that they are pre-approved.
A mortgage pre-approval differs from a pre-qualification, in that a pre-approval offers a complete understanding of a borrower’s financial situation. A pre-approval also establishes the borrower’s eligibility, as well as the size of their loan.
It’s helpful to think of the home buying process as technically beginning at the point of pre-approval. Anything else is just window shopping unless you have the funds to purchase the property upfront.
There are serious benefits to getting a pre-approval letter. For instance, this process lets you know exactly how much home you can afford. Additionally, your DTI is now determined, your FICO score is deemed acceptable, and you’re now an approved applicant. What’s even better? Getting pre-approved for a mortgage sorts out a lot of issues early, so you can focus on getting the home you want.
For more information on mortgage-pre-approval benefits, check out our blog post on why it’s important to get pre-approved.
Stay close to your mortgage professional
We see it every day—our team goes above and beyond to smooth out challenges, confusions, and concerns, as our clients apply for loans. The closer our clients stay to us throughout the application process, the better outcomes we’re able to deliver them.
Lean on your mortgage professional as your primary resource when determining what kind of mortgage you’d like to be pre-approved for as you go about buying a home in the summer. Schedule regular check-ins, promptly respond to paperwork requests, and bring any new financial developments to your broker’s attention.
Most brokers and loan officers are happy to go the extra mile to get exceptional results while putting their knowledge to work for you and your family.
Buy what you want, when you’re ready
You’d be surprised how many people place their wants and needs at the bottom of their own ‘to-do list.’
Do you have a family that needs more room? Are you downsizing? Do you want to live closer to your job or your children’s school? These considerations are just as important as the kind of loan you will obtain. The answers to these questions will determine the area you live in and the kind of home you eventually move buy.
You have a lot more latitude these days than you may realize. Interest rates are still holding at record lows, and the property market remains steady. If you’re an approved borrower, this summer should be a great time to purchase a home. You roughly have just as many choices available to you as you would have had in non-pandemic conditions.
In short, work with your local mortgage professional to determine how much home you can afford, and then pursue that makes sense for you.
Are you ready to become a homeowner this summer?
Despite so many changes occurring this year, buying a home in the summer is still possible. Markets are good, inventory is plentiful, and home prices are predictable.
You can achieve the dream of homeownership this year by getting preapproved for a mortgage, better understanding your complete financial picture, and working closely with a mortgage professional to reach your goals.
At MBA Mortgage Company, we help make the dream of homeownership come true every day. There’s no challenge we haven’t seen tackled, and there’s no obstacle we can’t figure out how to overcome.
If you’re ready to explore your mortgage options, get in touch with one of our experts.