Factors Affecting Your Raleigh Home Loan Approval
Mortgage rates in the Raleigh-Durham area are on the rise, but they are still lower than before the real estate slump. You can find a 30-year, fixed rate mortgage in Raleigh for between 4.10 and 4.69 percent, provided you have a solid credit score. If trends continue as they have been, these rates will continue to increase, so this is the time to consider whether or not you are ready to begin the process of homeownership.
Before you can begin the search for your dream home, you must tackle the job of getting approved for a home loan. With the many Raleigh homes for sale this summer, and the changes in the real estate market that indicate a potential increase in prices soon, now is the time to act. Yet, a mortgage represents a sizeable investment, perhaps one of the largest debts you will ever have. Knowing what to expect form the process, and how to improve your chances of getting approval, is important.
Understand Your Credit Report
Your credit report is one of the primary factors considered when looking at approval or denial of your home loan application. Before you begin applying, get a copy of your credit report, and deal with any discrepancies you notice. Be cautious with the use of your credit cards right before you apply. Avoid applying for new ones and limit your spending so you don't add too much debt to your balance. Anything a lender could view as irresponsible spending on your part could hurt your chances of being approved.
In addition to your credit score, lenders will look at the total amount of debt you have. If it appears you are over-extended, they are going to question whether or not they should lend to you. Your debts will be compared to your household's income, and this number is called the debt-to-income ratio. While each lender has its own desired debt-to-income ratio, in general you don't want to have a ratio higher than 45 percent if you are getting approved for a home loan.
Lenders want to know that you have the funds to pay back the loan, and as such they are going to balk at any potential problems with your employment history. If you have changed jobs recently, it may not be time to start shopping for Raleigh homes for sale quite yet. Getting approved for a home loan almost always requires an established history. You will use your pay stubs, bank statements and your tax returns to show your employment history.
Your Down Payment
The final piece of the three-part puzzle that most Raleigh lenders will look at is the amount of your down payment. FHA loans allow you to have as little as 3.5 percent down, but you have to have something. To avoid all penalties and insurance fees, you will want 20 percent.
With the many Raleigh homes for sale in the current market, ad prices still being at a low point, it's tempting to start shopping for a home. If you are in a good position for getting approved for a home loan, don't delay. These low rates are not likely to stick around much longer, so now is the time to get that approval and start shopping for your home.