Home Buyers Don’t Do This!

No credit, no debt, great mortgage 

If you are looking at buying a home in the near or distant future, don’t buy things on credit if you’re planning on getting a mortgage. Yes, it is wise to have credit built up for your credit score, but you won’t qualify for a mortgage. Lenders prefer to see a debt-to-income ratio (also known as DTI) smaller than 36% with no more than 28% of that debt servicing your mortgage. 

A debt-to-income ratio is calculated by dividing total recurring monthly debt by monthly gross income. 

DTI = total recurring monthly debt / monthly gross income (maybe insert graphics on this) 

Avoiding Getting Denied 

Once your mortgage is pre-approved, your loan then goes through underwriting. Underwriting, appraisal, and loan document preparation can take anywhere between 21 to 60 days. Once done, your lender will run your credit and if your debt ratio has increased, they can deny your loan. 

We have seen buyers turned down days before closing their dream home because of appliances and furniture credit. Or worse, the buyer will have their mortgage turned down because of a new car on debit. 

All of these can be avoided by resisting the temptation to buy things before you close a new home. 

Our Agents Can Help 

If you would like to check your debt-to-income ratio, we encourage you to talk to a local lender and get pre-approved into getting your own home. Castle Rock Realty can help you find a lender in your area, find listings that are a great fit for you, and answer any questions you may have along the way. Talk to one of our agents now!