Buying a house is a major financial endeavor. Before you can actually become a homeowner or get approved for a mortgage, a lender will consider a number of factors. This is to determine if you’re eligible for a loan and how much mortgage you can qualify for. Your credit score, down payment, and debt-to-income (DTI) ratio are the main factors lenders will look into.
Mortgage companies in Utah note that it is important to make sure that you’re not living above your means. Spending too much can put you in a big financial trouble and negatively affect your chances of getting a mortgage. Here are a few signs you are living beyond your means:
You have a low credit score.
If your score is below 600, this could mean that struggling with your finances. Note that your score shows your ability in repaying debt, so a lower rating means that you have trouble making payments. A poor credit can make it hard for you to qualify for a loan. Some lenders may approve your application, but the rates could be higher.
More than 28% of your paycheck goes to housing expenses.
If more than 28% of your income goes to your monthly loan, insurance, and taxes, you are likely to experience financial stress. This will also make it hard for you to maintain a good standard of living and still pay a monthly mortgage. You may not be able to get a loan that costs 28% of your gross income.
You save less than 5% of your income.
If less than 5% of your salary goes into savings, you are definitely not saving enough. This could also put you in danger if you or someone in your family has a medical emergency. Ideally, at least 20% of your income should go to your savings. Following the 50/20/30 rule is advisable.
Your bills and debts are piling up.
If you can’t keep up paying your bills to the point that they start to add up, you are likely living beyond your means. Lenders may have a hard time approving your application if you have other debts that you can’t handle. You need to cut back on your unnecessary expenses to avoid piling up of debts.
Your journey towards homeownership will be a smooth one if you are living within your means. You can talk to a reliable mortgage lender to learn how much you can afford or what loan programs are available for you.