Debt to Income Ratio Calculator

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Your Debt to Income Ratio (DTI) is a basic calculation used to express affordability. You can use a DTI calculator to find your own ratio. 

How to Calculate Your Debt to Income Ratio

Your DTI is calculated by combining all of your debt repayments and subtracting them from your total income, before expressing the calculation as a percentage. Use your gross monthly income and include rent/mortgage payments in your total outgoings.

As an example, if you earn $5,000 a month but pay $500 in rent, $250 in credit card payments and $250 in personal loan payments, then your ratio is 20%. This is considered low. However, if your income is just $2,500 and you have the same outgoings, then that ratio becomes 40%, which is considered high enough to cause financial stress.

How Important is It?

Lenders use the Debt to Income Ratio to estimate a borrower’s ability to make repayments. If we use the above calculation as an example, you have just $1,500 leftover every month after rent and minimum payments. If we add food, travel costs, and other essentials to the mix, that could drop as low as $500. 

That will be a huge red flag to a lender, who will seriously doubt your ability to make future repayments. A DTI above 40% will also impact your chances of getting a mortgage, with many lenders refusing to lend to anyone above 43%.

There are still personal loans available to consumers with a high DTI, but in these cases, they are supplied with a view to consolidation. The same goes for student loan refinancing.

How Your DTI Affects You

Your DTI does not directly affect your credit score, because the credit bureaus do not display your income or factor it into the equation. However, they do calculate something known as credit utilization, which works in a similar way.

Credit utilization is a comparison of the amount of credit that you have available versus the amount of credit that you use. A high score shows lenders you’re desperate to take what you can get and are more prone to maxing out credit cards; a low score suggests the opposite, hinting at more responsibility.

Credit utilization should be kept below 30%. This means you should avoid borrowing more than $3,000 on a $10,000 line of credit. Credit utilization accounts for 30% of your credit score and is a key factor in calculating your score, so it’s worth paying attention to.

One of the easiest ways to improve your credit utilization is to increase your current credit. Contact providers and ask them for a higher limit. This will increase the amount of available credit without increasing the used credit. 

How to Improve your Debt to Income Ratio

We’re stating the obvious here, but there are two ways to improve your Debt to Income Ratio, you can either earn more, or pay less. The former is easier said than done, but there are more options for the latter:

  • Pay more than the minimum – it may seem counterintuitive and won’t do you any favors in the short-term, but in the long-run it will clear more of the principal, lower the interest rate, and improve your rating.
  • Use windfalls and savings to clear debt – that vacation in the sun may seem like a great idea, but a few years’ peace of mind and easier access to credit and a mortgage is better than sunburn and beachside cocktails.
  • Avoid acquiring new debt – avoid taking any new credit, even if you qualify for it.
  • Keep an eye on your DTI to monitor your progress – it helps to know how fast you are progressing. You can use our Debt to Income Ratio calculator for this.

DTI and Credit

To give you an idea of how much your DTI affects your finances, here is a rough guide based on percentages acquired through our Debt to Income Ratio calculator:

  • DTI Score up to 15%: A low and favorable score, but as with all forms of debt, it’s worth monitoring your situation to ensure it remains that way.
  • DTI Score Between 15% and 25%: A ratio considered relatively safe and low. You shouldn’t have any issues.
  • DTI Score Between 25% and 40%: At this point things begin to look ominous, but it’s still salvageable. You will be offered higher rates when applying for new credit and should seek help via debt management. 
  • DTI Score Over 40%: Look into debt settlement, management or counseling. You are on the verge of being rejected for mortgages and will struggle to get loans and new lines of credit.
  • DTI Score Over 50%: You may qualify for some consolidation loans or refinancing options, but this is a severe state and requires immediate attention.

DTI Isn’t Everything

It’s important to remember that your Debt to Income Ratio score is just a rough calculation of affordability. It is used by lenders to determine whether you can afford to meet repayments, but it’s not the only thing they consider, nor is it the most important.

It’s not uncommon to have a high income and a fantastic credit score as well as a DTI of between 30% and 40%. In such cases, everything discussed on this page, including your score in our Debt to Income Ratio calculator, may seem a little strange. In such cases, just remember that the DTI is there for your benefit as well as the benefit of lenders. It’s a small red flag telling you that you should look into fixing your debt before acquiring any more credit or making any big financial decisions. 

It goes without saying that you can’t remain financially secure for long if more than a third of your income is spent on minimum payments, especially if you don’t own your own home and have any savings. 

Source: pocketyourdollars.com

Will Forbearance Prevent You from Getting a Mortgage in the Future?

Last updated on May 19th, 2020

Since the CARES Act rolled out in early April, more than four million Americans have reportedly put their mortgage payments on hold for up to 12 months.

The massive numbers taking part can be attributed to the widespread fallout from the coronavirus epidemic (COVID-19), and also the ease at which a homeowner can request assistance, with not much more than a letter or simple request to their loan servicer without proof.

It’s expected that many more borrowers will request mortgage forbearance in the month of May and beyond, as evidenced by a recent survey from Bankrate.

Update: There Will Be a 3-Month Waiting Period to Get a Mortgage After Forbearance

Need Help, But Not Yet Asking for It

need help

Apparently, many Americans are concerned about making mortgage payments in light of possible job losses or income curtailments, but most haven’t reached out for help yet.

Some 70% of Millennials said they were concerned about their ability to make mortgage payments over the next three months, but only 60% said they have contacted their lender.

Meanwhile, 56% of Gen Xers are concerned, but a mere 29% have reached out to their lender or loan servicer.

It’s even worse for Baby Boomers, with 43% concerned, and only 17% asking for help.

As to why, some said they didn’t know it was an option, or simply haven’t gotten around to it, or are waiting for lenders to reach out to them (good luck!)

Others cited unspecified reasons or said they came up with their own solution.

For me, this proves that homeowners are reticent to ask for help, possibly because they think it’ll count against them somehow, even though mortgage forbearance isn’t supposed to harm credit scores or result in delinquencies.

Mortgage Lenders Will Know You Requested Forbearance

  • Lenders told not to report loans in forbearance as delinquent to credit bureaus
  • But loan servicers and lenders are still flagging accounts on credit reports
  • Will these borrowers be considered “late” once the forbearance ends?
  • Could presence of forbearance on credit reports prevent borrowers from getting another mortgage?

My initial thoughts are it shouldn’t count against you, but that’s not always how it works, especially if a private company plays by its own rules.

After housing blew up a decade ago, the Home Affordable Modification Program (HAMP) and Home Affordable Refinance Program (HARP) were rolled out to help struggling homeowners.

While these initiatives provided relatively immediate relief to homeowners, they also resulted in various waiting periods to get subsequent mortgages.

So a homeowner who opted to receive assistance may have had to wait a year or two to get another mortgage.

These waiting periods were even longer (up to four years) if the borrower received a principal reduction that resulted in them owing less than originally agreed.

But shorter if there were extenuating circumstances, of which there will be for just about everyone this time around.

The question is will they use the past as a model for the future? Things were a bit different back then because there was perhaps some borrower fault, and basically none today.

While you could argue that all homeowners should have reserves saved up for moments like these, they often aren’t required by Fannie Mae, Freddie Mac, the VA, or the FHA.

So you can’t really blame a homeowner impacted by an unforeseen virus to continue making mortgage payments. Nor can you blame them for accepting the assistance you’re offering.

In other words, I can’t see Fannie, Freddie, the FHA, or the VA disallowing a mortgage refinance or a new purchase loan if they extended the forbearance in the first place.

In the case of a refinance, mortgage lenders (or the investors) would presumably receive the missed payment amounts via the payoff to make them whole.

Will Mortgage Forbearance Count Against You?

  • Just because your mortgage isn’t late doesn’t mean it won’t hurt you
  • Lenders may impose waiting periods for borrowers post-forbearance
  • They will likely scrutinize loan files if you requested forbearance in the past
  • It will be key to show them the event is behind you if you want another mortgage

Sure, you’re not technically behind on the mortgage, per the CARES Act and other forbearance programs, but lenders will know that you entered into a mortgage forbearance plan. It’ll be noted on your credit report.

While it might not be a formal delinquency or late mortgage payment, it’ll be visible to creditors when you apply for a new credit card, auto loan, or a mortgage.

It’s a notable event from a credit perspective, and thus will be shared, though it shouldn’t officially count against you.

In other words, its presence doesn’t necessarily mean you won’t be able to refinance or get another mortgage on a different property, especially if it wasn’t your fault.

However, you’re going to have to qualify for the mortgage, like you usually would in normal times.

That might be the dividing line, not so much a waiting period or a flat-out denial just because you took advantage of widespread mortgage forbearance.

Note that guidelines will vary by bank, especially if it’s a jumbo loan or portfolio loan that isn’t backed by Fannie Mae or Freddie Mac, or a government agency like the FHA or VA.

Regardless, it’ll be very important to stay current on mortgage payments post-forbearance. The same goes for any other accounts that show up on your credit report.

An underwriter will dig into your financials to determine this to ensure it’s an isolated incident and really behind you.

Ultimately, it might hinge on the borrower showing that they are back on their feet and that it was a blip related to COVID-19 and not due to their own personal financial missteps or issues.

Like those loan mods in the past, it’ll be crucial that the borrower make on-time payments once forbearance ends to ensure they qualify for a new mortgage without further delays.

Those who still need assistance post-forbearance, via a loan modification or further forbearance, will likely have trouble qualifying for another mortgage.

But that’s pretty obvious – if you can’t pay your existing home loan, why would a lender give you another one?

Read more: Will home prices go up or down due to COVID-19?

Source: thetruthaboutmortgage.com

What Is an Investment Property Mortgage?

If you’re looking for another source of income or want to start a side hustle as a home flipper, you may be considering the purchase of an investment property. Getting a mortgage loan for an investment property can be trickier than getting one for your primary residence, and obtaining a mortgage for investment property will require you to have a stronger financial picture than your typical mortgage loan would, too.

That doesn’t mean it’s impossible, though. Knowing your options when it comes to lending types, credit and financial criteria, and funding guidelines can help you navigate the process and ensure that you’re doing as much as you can to set yourself up for success.

In this article

What is an investment property mortgage?

An investment property mortgage is a loan that is used to purchase a property for either rental income or to flip and sell for a profit. Underwriting guidelines are more strict on investment property loans when compared to purchasing a home to live in or a vacation or secondary home.

Not all lenders offer investment property loans, as the risk of default is higher compared to lending money for a primary residence you plan to call home. That’s because you’re likely to continue paying your home mortgage payments in times of financial crisis. However, if rental income isn’t coming in for some reason, and you have to choose between paying your personal mortgage and your investment mortgage, you’re likely to pay to keep the roof over your head than pay on an investment property. This is also why mortgage interest rates are higher for investment properties vs. primary or secondary homes.

To get approved for a mortgage on an investment property, you must:

  • Have a good or better credit score
  • A down payment of 10% to 25%
  • Cash reserves available
  • Stable employment

What is an investment property?

An investment property is a unit that is purchased to provide a stream of income or to flip and sell for profit. This could be a single-family home or a multi-unit building with four or fewer units. Apartment and condo buildings with five or more units are considered commercial real estate and fall under separate guidelines.

Examples of an investment property can include:

  • Single-family home
  • Duplex
  • Triplex
  • Townhome
  • Condo

While many investors seek to gain a stream of income from renting their units out to tenants, others prefer to purchase a home to update or improve and then resell to make a profit. Either way, investment properties can be a lucrative source of income if you’re smart about your investment and are able to nail down an investment property loan for your purchase.

That doesn’t mean there aren’t risks, though. As with anything, there are pros and cons to owning rental properties as well as tax benefits that make purchasing investment properties an attractive way to make money. But with mortgages at historically low interest rates, buyers with the funds, credit and the desire to invest could consider an investment property a viable source of income.

Difference between investment property loan vs. regular mortgage

While you’ll choose from the same loan types — conventional, fixed, adjustable rate, government-backed — for both regular mortgages and investment property loans, the interest rates and lending requirements vary vastly from one to the other. From a lender’s standpoint, a mortgage loan for an investment property is riskier than for someone’s home, which is reflected in higher interest rates. The average interest rate can be as much as 0.75% more for investment property loans when compared to conventional mortgage loans.

On top of higher interest rates, lenders also have stricter guidelines to follow for investment property mortgages. For example, the real estate lending standards set by the FDIC limit the loan-to-value of an investment property at 85%, whereas the LTV of an owner-occupied residence can be as high as 100% depending on the loan type and lender.

While buyers who purchase a home with a regular mortgage can get away with a much lower down payment — in some cases as low as 3.5% with an FHA loan or 0% with a USDA loan — investment property lenders want more down on the property. Depending on the property, the lender and your credit, expect to pay between 10% and 30% down on the property.

Lenders also expect borrowers to prove they have at least six months worth of cash reserves available to pay for the mortgage, whether or not they have tenants lined up yet.

Requirements for an investment property mortgage

While lender requirements vary, some general requirements you can expect when applying for an investment property mortgage include:

  • Low debt-to-income ratio. Freddie Mac’s investment property guidelines for DTI for is 45%. The lower your DTI, the better chance you have of getting a low interest rate on your loan and more lenders vying for your business.
  • Significant amount of borrower funds. You’ll need a significant amount of cash that you can prove came from your savings or investments to get an investment property mortgage. Your down payment and closing costs may not include the use of gifted funds, so plan accordingly when sourcing cash if you don’t have the money saved and ready for use.
  • Higher than average credit profile. You’ll need a relatively high credit score to qualify for an investment property loan. Most lenders will require a minimum credit score of 620 to qualify for an investment property mortgage, though some like Guaranteed Rate will go as low as 580 and others will require a much higher score to qualify. But even if you can find a lender who will work with a lower score, you may want a higher score before applying. Higher credit scores command better interest rates and lower down payments.
  • Financial documents. As with a regular mortgage, you must provide pay stubs or other ways to show employment income, as well as your prior year’s tax returns and any other information or documentation that the lender requests.

Where to get an investment property mortgage

Though it’s riskier to lend money to investors, this likely won’t limit the lender options you have to choose from. While not all lenders offer investment property loans, there are a number of mortgage lender types to consider, including:

  • Conventional banks
  • Online lenders
  • Credit unions
  • Peer-to-peer lenders

Online lenders and credit unions may offer better interest rates or have more lenient guidelines than conventional banks, so these lenders are worth checking out. Credit unions are member-owned nonprofit financial institutions that require you to join as a member, but the application process is generally simple and can greatly benefit you in the form of lower rates, flexible lending parameters and other perks.

Private investors, known as peer-to-peer lenders, are also an option, though interest rates tend to be even higher with shorter repayment terms. These types of lenders also often charge more fees, including pre-payment penalties, to borrowers.

Another option is to do a cash-out refinance on your primary residence to pay for the investment property. Depending on the amount of equity you have available, you can pay for some or all of the cost without having to find an investment property lender. This isn’t always ideal though, since you’re essentially wiping out the equity in your home for a more risky investment.

Ultimately, the best way to find the right investment property mortgage is to shop around and see what different lenders offer. Each borrower has different needs and goals, so you may have to shop around to find a lender that’s a good fit for you. It’s smart to do that no matter what, though — as you should shop lenders in order to save money on rates and fees, too.

Compare top mortgage lenders

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Can I Get a Mortgage With Student Loan Debt?

Do you remember your college experience? More Americans than ever before are attending college or university, but there’s just one little cloud that rains on that parade: debt.

The unfortunate reality is that many young Americans who are beginning to think about buying a house or starting a family are still on the hook for at least some portion of their student loans. This has the potential to make buying a house difficult, and many analysts believe that this has contributed to the overall decline in millennial homeownership. Fortunately, there are steps you can take to limit the impact your student loan debt has on your housing prospects.

Buying a house is definitely possible, even with student loan debt! Today, we’ll talk about how student loan debt affects the home buying process, and how a supportive loan company like Homie Loans™ can help you overcome these potential obstacles.

The Challenges of Getting a Mortgage With Student Loan Debt and How to Overcome Them

There are many reasons why having a large chunk of student loan debt can be a challenge during the home buying process. Primarily, it has to do with debt, savings, and your credit score.

Your Debt-to-Income Ratio

Your debt-to-income ratio (also known as DTI) is a metric that lenders use to evaluate your finances when they’re looking at offering you a home loan. It can be calculated by taking all your incoming money (salary, investments, etc.) and comparing that figure to your total existing debts. The higher your DTI ratio, the riskier a lender will consider your loan.

Your student loan debt is considered in your DTI by looking at your monthly payment or your total outstanding balance. Remember, student loan debts have different requirements, standards, and deadlines. A certain percentage of those, no matter their circumstances, will be counted toward your DTI.

Cut Down on Debt

You don’t need to be entirely debt-free to buy a home, but you should definitely have your debt under control, and preferably under the standard 28% debt-to-income ratio. To lower your DTI, you can either look for ways to elevate your income, or you can pay off some debt – preferably both! When paying off debt, look for the debt with the highest monthly interest rate, and pay that off first.

Some people choose to refinance their student loans, which is a way to negotiate a new monthly payment and a corresponding lower interest rate. If you can refinance responsibly, this is a good action to take.

The Price of a Down Payment

Even if you do have a good DTI, chances are it’s more difficult to save when you have to put money towards your student loan debt every month. Every $100 that gets repaid is $100 that you can’t put into your own savings. Many people with student loan debt find saving challenging for this reason.

Look Into a Loan

There are a lot of things that younger buyers don’t know about the home buying process. One of the most important things to realize is that in some circumstances, there are loans available that can help with either your down payment, or your mortgage. These programs include down payment grants (great for lower-income buyers), forgivable second mortgages, and matched savings programs.

Your Credit Score

Another way that student loan debt affects your ability to buy a house is through your credit score. If you haven’t made your payments on time, or if you’re relying on multiple credit cards and lines of credit to make ends meet while paying off your debts, this will negatively affect your credit score. The lower your credit score, the harder it will be to get a good interest rate on your mortgage.

Improve Your Credit Score

There are a lot of factors that go into determining your credit score. Healthy financial habits will help keep your credit score high. These include paying off debts on time and using a smaller percentage of the credit that’s available to you. It’s also a good idea to avoid new debts like a car loan if you’re planning on buying a house in the near future. It will also help you to pay your payments on time, this is an easy way build credit.

Get Pre-Approved for a Mortgage in Advance

Another great way to make the home buying process easier, especially if you have student loans, is if you get pre-approved for a mortgage in advance. That way, you’ll know your budget going in, and there’s no rush to secure a mortgage in the middle of the house-hunting process.

When you’re pre-approved, it can also help sway sellers, because they know you’re serious about your purchase and have taken the time to come in with all your documentation ready to go.

Make the Home Buying Process Easier With Homie Loans

Having some student loan debt doesn’t mean the housing market is closed to you. With some careful financial planning, you can continue paying off your student loan while searching for your dream home.

If you want a partner in the process that can also offer substantial savings on a great mortgage rate, try Homie Loans. You can take advantage of our great rates even if you’re not buying with a Homie agent! If we can’t offer you the best locked loan rate, we’ll give you $500 in cash.*

Read more about preparing your finances for homeownership!

Tips for Affording Your First Home
Common Home Buying Fears and How to Overcome Them
What Are Closing Costs?

*Subject to Terms & Conditions

Source: homie.com

3 Simple Mortgage Tricks Can Save You Over $5000/year

July 8, 2019 Posted By: growth-rapidly Tag: Buying a house

If you’re ready to refinance your mortgage loan, and speed up the process of being debt free, then you’ve come to the right place. The following mortgage tricks can save you several thousands of dollars.

As a homeowner, it’s probably been a while since you last checked and compared home loan rates to see if if your current loan rate is still a good deal. If you haven’t done so in a while, then you’re making a big mistake. Indeed, this mistake could be costing you a lot of money in interest every year, given that there are relatively low home loan rates out there.

3 Simple Mortgage Tricks Can Save You Over $5000/year:

These 3 simple mortgage tricks can help you get rid of your debt sooner, save on interest, and allow you to live in a house that is actually and really your own without worrying about monthly mortgage payment ever again. Who wouldn’t want that!?


LendingTree: A Better Way to Find A Mortgage

LendingTree.com is making getting a mortgage loan simpler, faster, and more accessible. Compare the best mortgage rates from multiple mortgage lenders all in one place and at the same time. >> (opens in a new tab)”>LEARN MORE ON LENDINGTREE.COM >>>

Related Resources

1. Compare mortgage rates.

Even if you think your home loan was a pretty good deal, you still need to compare home loans to see what rates are available.

LendingTree mortgage loans comparison can help you find the best mortgage loan rates for your needs and situation. With LendingTree, you can compare several mortgage lenders for home loan rates and fees side by side at one place and at the same time. It’s easy, fast, and free.

Head over to LendingTree now to compare low rate home loans.

2. Establish your credit score.

Before you can get the best home loan, you will need to establish and maintain a good credit score. In fact, a good credit score is one of the most important factors to determine whether you will get a good rate.

The first step then is to get a copy of your credit report for free online. Check for any mistakes and address them immediately. And if you find any red flags, contact the three credit bureaus (Equifax, Transunion, Experian). If your credit score is below 730, take steps to raise it.

One of the ways to raise your credit score is to pay your bill on time. In fact, payment history accounts for 35% of your total credit score. Another way to improve your credit score is keep your credit card utilization rate below 30 percent of your total balance. For more information, check out: How To Raise Your Credit Score To 850.

3. Refinance your mortgage.

After comparing home loans, you need to refinance it with a lender. Refinancing your loan simply means that you take a new loan to replace the one you currently have, in the hope that you get a lower interest rate, so you can same money on interest. Or that you get a shorter term on your mortgage.

Refinancing can save you over $5000 a year in interest and fees.

Want to compare home loans? Check out the latest mortgage rates through LendingTree. It’s completely FREE.

Not only that, it will allow you to pay your mortgage sooner. Let’s take an example. Let’s say you have a 30 year, $400,000 mortgage with an interest rate of 4.04%. If you were to refinance the loan with a rate of 3.34%, you’d be able to pay off the loan 4 years earlier.

So, if you’d like to pay off your loan sooner, check out some current rates now.

Related Articles

3 Signs You’re Not Ready To Refinance Your 30-year Mortgage

How To Pay Off Your Mortgage Early

Related Resources

Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. >> (opens in a new tab)”>Get started today >>>

Source: growthrapidly.com

How Much House Can I Afford

May 12, 2019 Posted By: growth-rapidly Tag: Buying a house

Unless you expect to rent all of your life, you’re going to need to buy a house of your own. You will need to figure out in what neighborhood to live in.

You’ll need to figure out how long you expect to live in the house. However, this is only one piece to the puzzle.

The main thing you will need to determine is how much house you can afford.

After all, and as any financial advisor will tell you, taking a 30-year home loan for a house is a major financial. And it should not be taken lightly. The worst thing you can do is to get a loan that is too expensive for your budget.

So knowing how much house you can afford can help you determine whether or not you’re ready to buy a house.


LendingTree: A Better Way to Find A Mortgage

LendingTree.com is making getting a mortgage loan simpler, faster, and more accessible. Compare the best mortgage rates from multiple mortgage lenders all in one place and at the same time. LEARN MORE ON LENDINGTREE.COM >>>


Here are some strategies that can help you determine how much house you can afford.

Related topics:

5 Signs You’re Not Ready to Buy a House

10 First Tome Home Buyer Mistakes to Avoid

1. Do a Budget.

First up, do you have a budget? As any financial planner would say, buying a home is perhaps the biggest expense you will ever make in your life. When you are a homeowner, not only will you have to account for basic expenses like food, transportation, entertainment, etc, you will also have to account for monthly mortgage payments, home repairs, etc…

So, having a budget is an important step in determining how much home you can afford.

2. Increase your Credit Score.

How much house you can afford also depends on your credit score. In fact, mortgage lenders aren’t likely to offer you a mortgage loan if you have a bad credit score.

Although you can get an FHA loan with a 580 minimum score, but there are things to consider when taking an FHA loan, like paying for a private mortgage insurance (PMI).

So, a good credit score will not only help you get qualified for a loan, but it will also help you get the best terms and rates possible. So the higher your credit score, the better.

Get a copy of your credit report for FREE and address any mistakes immediately. You can call the 3 credit bureaus (equifax, equinox, and transunion) to report any inaccuracies. Once you do that, the next step is to try to raise your credit score.

One of the ways to improve your credit score is to pay all of your bills on time. Payment history accounts 35% of your total credit score. So, it’s crucial not to have late payments.

Another way to raise your credit score is to keep your credit balance under 30%. For more information, read: How To Raise Your Credit Score to 850.


Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.


3. Down Payment.

Your down payment is crucial in figuring out how much house you can afford. It is so because the larger the down payment, the less financing you will need, which also means the lower your monthly mortgage payment will be.

So although you can put a down payment as low as 3.5%, the rule of thumb is to put 20%.

Click here to compare mortgage rates through LendingTree. It’s completely FREE.

4. Beware of Closing Costs.

In addition to coming up with a sizable down payment to purchase your home, you will also need to think about the closing costs. Closing costs typically cover the home inspection fees, attorney’s fees, appraisal fees, etc.

Closing costs can range from 2 to 4% of the home purchase price. Depending on the home, closing costs can cost you a lot of money.

5. Get Pre-approved for a Morgage.

One way to know if you can afford a house is to get pre-approved for a mortgage. Mortgage lenders will gather your financial information like your salary, debt, employment history, and credit score, before they decide to give you a loan. Getting pre-approved is important, because at least you know you’re shopping for a house within your budget.

One word of caution though, a mortgage lender can give you a bigger loan. So make sure you can afford it. In other words, just because you’re qualified for a specific amount of money, does not necessarily mean you can afford it. So, review your budget before making a decision.

Related: Apply for a Mortgage Loan Today

Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. Get started today >>>

Related Resources

Get Pre-qualified For A Mortgage Online Now

Compare Mortgage Rates All in One Place

Check Your Credit Score For Free

Source: growthrapidly.com

How To Buy A Home With A Low Credit Score

July 23, 2019 Posted By: growth-rapidly Tag: Buying a house

Life is full of surprises. Just when you think you have everything figured out, a roadblock, like losing your job, presents itself. And a few months later you realize that you have missed on a few credit card payments.

When applying for a mortgage loan, mortgage lenders not only assess your ability to repay the loan, but they also review your credit report.

Click here to find the best mortgage lenders for low or bad credit score.

And if your credit report does not reveal a good credit score, then getting a mortgage loan to finance your property can be quite difficult. If you’ve found yourself in this situation, do not despair yet. There are a few things you can do to overcome a low credit score. Here are a few tips to get started:

1. Meet face-to-face with a lender and be transparent

When you have a low credit score and you have run out of time to fix it, one of your best options is to meet face-to-face with a lender and explain your situation.

Indeed, there are some lenders out there who are inclined to offer you a home loan despite bad credit after taking into consideration your unique circumstances.


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When a lender runs your credit through a computer, you risk to be automatically rejected if you don’t meet the computer’s prerequisites.

But when you sit down with a lender and explain your poor credit, the lenders will be able to reach a deeper understanding on whether you are able to repay the loan.

So if you have a bad credit score, it’s best to be transparent and upfront about it.

2. Show that you have a full time, stable job.

Although your credit score is an essential lending requirement, it’s not the only thing a lender looks at.

Being able to show that you have a full time, stable job is another way to increase your chance of getting a loan even if you have a low credit score.

A good income will show that you’re able to make the payments on the loan despite a bad credit score.

Related: Apply for a Mortgage Loan Today

3. Have a bigger down payment.

A bigger down payment, say 20% + of the home purchase price, makes it more likely to get approved for a loan despite having a low credit score.

Furthermore, and more importantly, putting at least 20% down will allow you to avoid paying private mortgage insurance (“PMI”), which is an additional monthly payment you make on top of your monthly mortgage payments.

A PMI is a way to assure the lenders, that if you, as a borrower, default on the loan, the bank will be covered by mortgage insurance.


Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.


4. Consider applying for an FHA loan.

Since you have a low credit score, you may assume that you have little to zero chance with a lender. But did you know that you still can get approved for an FHA loan?

Depending on the amount of money you’re seeking as there are limits, an FHA loan may be the right loan for you.

An FHA loan is loan that’s insured by the Federal Housing Administration. FHA Loans are very popular among first time home buyers because they require a much lower down payment (3.5%) and a very low credit score (580).

So if you have a low credit score of 580 and can meet the other FHA loan requirements, you should be able to a home loan.

Click here to compare FHA loan rates

For more information see: FHA Loan Requirements – Guidelines & Limits.

5. Avoid applying for more credit prior to loan approval.

A low credit score is itself not a good sign. But the more debt you’re applying to prior to seeking loan approval can significantly damage your file.

You see, every time you’re applying for a new credit, it can be a credit card, a car loan or a personal loan, it goes to your credit report. And the more inquiries you have on your credit report raises a red flag that you’re experiencing financial difficulty.

These are just a few tips to consider when shopping for a home loan with a low credit score.

Tips to raise your credit score:

Although you still can get a loan despite having a low credit score, it’s not always the best decision. For one, it comes with higher interest rates.

So if you’re not in a rush, your best bet is to put buying a house on hold and work on improving your credit score. Here are a few tips to improve your credit score. For more information, read: How To Raise Your Credit Score To 850.

Always pay your bills on time and in full. Payment history accounts for 35% of your total credit score. So whether it’s a credit card or a phone bill, stay on top of these payments

Keep your credit card utilization rate below 30 percent if your total balance.

Be stable. One thing that may make you a low risk borrower before a lender’s eyes is having a stable job. Lenders love stability. So if you have been with your current job for a while, that will work in your favor.

Get a credit card if you don’t have one. You may think having a new credit card may hurt you, but it can actually help you if you’re able to manage it properly.

Click here to compare mortgage rates through LendingTree. It’s completely FREE

Related Articles:

5 Signs You’re Not Ready To Buy A House

Top 6 Home Buying Risks To Avoid

The Biggest Mistakes Millennials Make When Buying A House

How Much House Can I afford

Related Articles

Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. Get started today >>>

Source: growthrapidly.com

Top 6 Home Buying Risks To Avoid

June 22, 2019 Posted By: growth-rapidly Tag: Buying a house

Buying a home, especially as a first time home buyer, while can be an exciting time, can be a scary, stressful and expensive process. That’s why it’s important to be aware of the risks involved. By having an idea of what you may encounter when buying a home, you can take steps to avoid them. If you think you’re ready to buy a house, here are some home buying risks to avoid.

If you are interested in comparing the best mortgage rates through LendingTree click here. It’s completely free.

Check out: 5 Signs You’re Not Ready to Buy a House

If the process of buying a home seems complicated to you, it may make sense to speak with a professional. The SmartAdvisor free matching tool can connect you with up to three financial advisors in your neighborhood.

1. Obtaining the wrong mortgage.

The worst thing you can do when buying a house is to obtain the wrong home loan. A bad mortgage loan can be one with a high interest rate, which means that your monthly payments are higher. You also have to pay more in interest over the term of the loan.

The people who find themselves in this kind of situation are those who fail to shop for multiple mortgage lenders before deciding on one.

Not all mortgage loans are created equal. Mortgage rates and fees may differ from lender to lender. So to avoid this risk, you should plan to compare several mortgage rates. While the mortgage process can be overwhelming at times, you can navigate the process by comparing home loans side by side through LendingTree.


LendingTree: A Better Way to Find A Mortgage

LendingTree.com is making getting a mortgage loan simpler, faster, and more accessible. Compare the best mortgage rates from multiple mortgage lenders all in one place and at the same time. LEARN MORE ON LENDINGTREE.COM >>>


2. You don’t have any job security.

Another of the several home buying risks to avoid is to make sure you have a stable job with a steady paycheck so you can make your payments on time.

Unless you were able to purchase your home with all cash, you will need to make monthly mortgage payments to satisfy your loan requirements.

In addition, you will need to consider additional expenses, like money to replace the roof or to renovate the kitchen and bathroom. Therefore you will need a steady paycheck or stream of income.

So before you jump into homeownership, make sure you have a stable job.

Related: Apply for a Mortgage Loan Today

3. You forget about other costs.

First time home buyers may think that buying a house only involves finding and getting a mortgage loan, coming up with a down payment, making an offer on a house that they like, and preparing for closing.

However, they may not realize that there are other costs that come with buying a house.

In addition to the down payment and mortgage payments, they need to come up with closing costs, inspection costs, moving costs, maintenance costs, taxes, etc… And if you don’t consider and budget for these costs, you may be in hot water.

4. Buying a home full with problems.

You may have found a house you’ve always dreamed about. But it’s never good idea to purchase a home without conducting a building inspection.

A house inspection is crucial, because it can let you know of a lot of problems that you as a first time home buyer would have never thought existed.

It can reveal problems with the structure of the house, the roof, plumbing, electricity, etc.

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If you ignore house inspection and move in anyway, these issues can end up cost you a lot of money and can also be detrimental to your safety and well-being.

In conclusion, buying a home can be a fun and exciting experience. It can also come with unique challenges. By being aware of these home buying risks, you can take steps to avoid them.

More articles on buying a house:

The Biggest Mistakes Millennials Make When Buying a House

How Much House Can I Afford

5 Signs You’re Better Off Renting

10 First Time Home Buyer Mistakes to Avoid

Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. Get started today >>>

Source: growthrapidly.com