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Top 4 Factors to Consider When Choosing Your Mortgage
Buckle up, folks. Navigating the East Texas real estate market with today’s home prices and interest rates can feel a bit like trying to herd cats in a windstorm. 🌪️ But don’t let that deter you! 💪 Most homeowners eventually find a mortgage that fits them just right. 👍
In fact, a recent survey showed that most folks are pretty darn happy with their home loans, and most would even buy their current homes again if they had the chance (hindsight is 20/20, right?). 😉
So, how do you find your perfect mortgage? 🤔 It’s not just about rates and terms; it’s about finding a loan you’ll be comfortable with for the long haul. 🏡 After all, it’s not just a house, it’s a home – and a mortgage is a commitment, not a fling. 💕
Think about it: Are you a risk-taker or do you prefer a predictable plan? 🎲 Can you handle a bigger payment if rates rise, or is your budget already stretched thin? 💸
To help you sort through the options, let’s look at four big factors when picking a mortgage:
1. Your Credit Score ✨
That magical three-digit number isn’t just for show. It affects your interest rate AND the types of loans you can even get.
- Conventional loans from big banks usually want a score of 620 or higher. 🏦
- USDA loans (for rural properties) like to see 640+. 🌾
- Jumbo loans (for those fancy, high-priced homes) may need 700+. 🏰
But don’t worry if your score’s a bit lower.
- FHA loans can work with scores as low as 500 (with a bigger down payment). 😊
- VA loans are great for military folks, even with scores in the 580-620 range. 🇺🇸
Some local lenders might be flexible too. But if you can, improving your credit before buying can save you a bundle in the long run. 💰
2. Your Income and Expenses 💼
How much you make and how much you owe matters a lot. Lenders want to see you have breathing room after paying bills, ideally spending no more than 28% of your income on housing (36% max).
They’ll also look at your debt-to-income ratio (DTI) – how much debt you’ll have compared to your income. High DTI is the #1 reason mortgage applications get rejected! 🚫
- Conventional loans: Aim for a DTI below 36%. ✅
- FHA loans: Can go up to 43-57% depending on your situation. 🤷♀️
- VA loans: Can go above 41%. 👍
- USDA loans: DTI can’t be higher than 41%, and your income needs to be below a certain limit. 🧐
3. Your Down Payment 💰
The bigger your down payment, the more options you have. While you don’t need 20% for a conventional loan, the median in 2023 was 14%.
- Larger down payment: Can help you qualify for loans you might not otherwise, like if you’re self-employed. 💪
- Smaller down payment: Consider FHA loans (3.5% down) or VA/USDA loans (no down payment, but there’s a funding fee). 🤝
Remember, a smaller down payment means higher monthly payments and more interest paid over time. You’ll also likely need mortgage insurance. 😕
4. Your Lifestyle and Risk Tolerance 🧘♀️
Mortgages are long-term commitments. Find one you can live with!
- Fixed-rate mortgages: Predictable payments, but you might pay more interest overall. ⚖️
- Shorter-term mortgages: Lower total interest but higher monthly payments. 🚀
- Adjustable-rate mortgages (ARMs): Lower initial payments, but rates can change, so they’re riskier. 🎢
Bottom Line
Buying a home in East Texas is achievable, even in today’s market. 🎉 The key is to find the right mortgage for you. Shop around, compare terms, and don’t be afraid to ask questions. 🙋♀️
And hey, if you’re feeling overwhelmed, reach out! I’ve got a network of trusted mortgage pros who can help you find the perfect loan and home. Let’s make your East Texas dream a reality. ✨
Why Pre-Approval Is Even More Important This Year
On the road to becoming a homeowner? If so, you may have heard the term pre-approval get tossed around. Let’s break down what it is and why it’s important if you’re looking to buy a home in 2024.
What Pre-Approval Is
As part of the homebuying process, your lender will look at your finances to figure out what they’re willing to loan you. According to Investopedia, this includes things like your W-2, tax returns, credit score, bank statements, and more.
From there, they’ll give you a pre-approval letter to help you understand how much money you can borrow. Freddie Mac explains it like this:
“A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. . . . Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”
Now, that last piece is especially important. While home affordability is getting better, it’s still tight. So, getting a good idea of what you can borrow can help you really wrap your head around the financial side of things. It doesn’t mean you should borrow the full amount. It just tells you what you can borrow from that lender.
This sets you up to make an informed decision about your numbers. That way you’re able to tailor your home search to what you’re actually comfortable with budget-wise and can act fast when you find a home you love.
Why Pre-Approval Is So Important in 2024
If you want to buy a home this year, there’s another reason you’re going to want to be sure you’re working with a trusted lender to make this a priority.
While more homes are being listed for sale, the overall number of available homes is still below the norm. At the same time, the recent downward trend in mortgage rates compared to last year is bringing more buyers back into the market. That imbalance of more demand than supply creates a bit of a tug-of-war for you.
It means you’ll likely find you have more competition from other buyers as more and more people who were sitting on the sidelines when mortgage rates were higher decide to jump back in. But pre-approval can help with that too.
Pre-approval shows sellers you mean business because you’ve already undergone a credit and financial check. As Greg McBride, Chief Financial Analyst at Bankrate, says:
“Preapproval carries more weight because it means lenders have actually done more than a cursory review of your credit and your finances, but have instead reviewed your pay stubs, tax returns and bank statements. A preapproval means you’ve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.”
Sellers love that because that makes it more likely the sale will move forward without unexpected delays or issues. And if you may be competing with another buyer to land your dream home, why wouldn’t you do this to help stack the deck in your favor?
Bottom Line
If you’re looking to buy a home in 2024, know that getting pre-approved is going to be a key piece of the puzzle. With lower mortgage rates bringing more buyers back into the market, this can help you make a strong offer that stands out from the crowd.
Why Aren’t Home Prices Crashing?
A lot of people expected prices would crash this year thanks to low buyer demand, but that isn’t happening. Why? There aren’t enough homes for sale. If you’re thinking about moving this spring, let’s connec
