Every buyer has this ideal home in mind. There’s the things that you absolutely need in a home and the things that you absolutely want. Then, there’s some added bonuses that you hope for.
In a seller’s market, buyers are facing more competition than ever. With West Knoxville homes for sale getting offers at or above the list price, many buyers are concerned about being able to afford they home they want and need.
In this post, we’ll show you a few tips to get pre-approved for more when you buy a West Knoxville home, so you can buy the best home possible that is within your budget.
First of all, debt matters when you buy a West Knoxville home. You can make great income, but if you come with a lot of debt, it can hinder your ability to afford the West Knoxville home that you want.
When you get pre-approved for a West Knoxville home, your loan officer will look at your debt-to-income ratio. Debt-to-income ratio is a simple way that lenders measure your ability to make payments. It measures how much debt you have compared to your gross monthly income (i.e. income before taxes).
To figure out your DTI, you take all your monthly debt divided by your gross income. For example, if you make $4,000 a month and you have $1,575 in total monthly debt, your DTI is 39%. Generally, lenders will allow somewhere between 45% to 50% of overall debt-to-income when you’re being concerned for a mortgage. In the example we listed above, that borrower would only have around 6% to 11% of their remaining debt to go towards a mortgage.
So, if you want to be able to afford as much home as possible, work on eliminating your debt. It will allow you to afford more home when you buy a West Knoxville home.
The interest rate you’ll be approved for will be directly connected to your credit score. The better the credit score, the lower the interest rate. This is why it can pay off to to manage your credit wisely.
Your interest rate is part of your monthly payment. When you get locked in at a lower interest rate, your payment will be less, thus allowing you to afford more home. As another added bonus, when you get a lower interest rate, you’ll also save more money over the life of the loan.
So, be sure to pay your bills on time, keep your longest line of credit open, and utilize a minimum amount of your overall credit. By doing this, you’ll ensure that your credit score stays in tip top shape.
In addition to managing your credit and debt, another way to help yourself get pre-approved for the most money possible is to show two years worth of income if you have bonuses or commission. This will ensure that your full earning potential is counted towards your mortgage.
When your income is variable, mortgage companies like to see that your income has been consistent over the past two years, which is why they usually require two years worth of tax returns. This also ensures that they’re using all of your income to approve you for a loan, thus allow you to utilize your full potential when you buy a home.
Finally, as great as it can be to spend as much as you’re approved for on a home, just be sure that you make sure that it’s within in your own personal budget. There are many times where buyers can be approved for a loan amount, but they don’t personally want to spend that amount. You don’t want to move into this fabulous new house and be tight on cash because making the mortgage payment is tight.
Are you interested in buying a West Knoxville home for sale? If so, please do not hesitate to let us know. Rick can be contacted at 865-696-9002 or via email at [email protected]. Kati can be contacted at 865-696-1888 or via email at [email protected]. Also, be sure to check out our West Knoxville Home Search Page to see what homes are for sale in the area.