Many companies offer a "Know Your Numbers" campaign as part of their health care package. Employees get a quick check of their blood pressure, heart rate, cholesterol and glucose levels. This helps you get a picture of what your general health looks like at that moment. Then you know where you need to tweak or completely change to make your numbers better. Consider this your "Know Your Numbers - Real Estate Edition".
Know Your Numbers - Real Estate Edition
Credit Score - The very first part of the Know Your Numbers - Real Estate Edition is to know your credit score. Lenders use this to help determine your interest rate. To qualify for the best interest rates, your score needs be at least 720. However, there are several plans in place that you could benefit from if your score is lower.
Pull your credit report from AnnualCreditReport.com. Look for errors. Send in correction requests for any you find. You want your credit to look as good as possible when you apply for your mortgage loan. This can take several weeks. So, start now.
Down Payment - The next part of the Know Your Numbers - Real Estate Edition is to know what you need for a down payment. The better your credit score, the less you will have to put down to qualify. Excellent credit can get you in with just 3.5% down. Lower scores could require 10% down. No matter what your score may be, you can avoid the Private Mortgage Insurance (PMI) that all lenders charge if you put at least 20% of the sale price down.
Debt-to-Income Ratios - Finally, the last bit of the Know Your Numbers - Real Estate Edition you need to keep in mind is your debt-to-income ratio. This is your total gross household income divided by your total debt (current mortgage/rent payment, student loans, car lease, credit cards, etc). To qualify for a 30 year fixed-rate FHA loan, your new mortgage payment has to be no more than 29% of your total income. Your total debt cannot be higher than 41% of your total income.
Just like your health, it is important to know your numbers when it comes to buying a home. Whether this is your first, second or investment property, get your numbers in line and you will have a long, satisfying road to home ownership. Contact me for more information.
Matt Irvin, Flexible Solutions to Fit Your East Bay Property Management Needs
Originally posted on my Walnut Creek Property Management blog here: http://www.mattirvin.com/blog/know-your-numbers-real-estate-edition.
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