Are you finally planning to buy your own house? It is a great step towards a secure future. But is a high debt becoming your major obstacle in acquiring the loan amount? Quite often, if you have high credit record or prior financial issues, even the banks refuse to provide you with the required loan amount. And thus, all your hopes of building a beautiful and lavish house of your dreams fall flat on the ground. Then, what do you do? Giving up is definitely not the solution. You have to look for a home loan which caters to people with a high debt ratio.
What is the debt to income ratio? This is basically the percentage of your income which is spent on meeting your debts every month. If this ratio is high, it means that a larger portion of your income is lost on the debt payments while a lower ratio indicates that only a small part of your income is spent on the debt payments. Even though it is difficult to get a loan approval for home loans with a higher debt ratio, it is not particularly impossible. Where most of the aspiring homeowners fail is they take certain wrong steps before applying for the loan which further decreases their chances of getting a loan.
Here, we have put together a few mistakes that you must not commit when you are applying for a loan with a high debt ratio. Take a look.
- Not Making Plans for the Payments
If you are not in a dire emergency to buy a home where you absolutely cannot wait, you should seek the advice on the kind of accounts where you can make extra payments in order to decrease the debt ratio. Not planning on the payments can be a huge problem. Moreover, you should know that even the order of paying off your student loans, car payments, furniture, credit cards, or other kinds of additional loans can make a difference to your credit record regardless of whether it is a revolving account or an installment. So, you must not make the mistake of not sketching out a plan for the payments.
- Making a Low Down Payment
Although it is understandable that making a huge down payment might not always be possible while applying for a loan, especially for some applicants, it is also true that this is something which you should do. Also, you should not forget to consider the IRAs or other retirement accounts for the savings interest as well as the PMI expense v/s increase in the asset values. Failing to do so will make you appear as somebody who is not serious about their decision of buying a house and shows lack of commitment for the investment, thereby reducing your chances of qualifying for the loan.
- Not Resorting to Government Assistance
Government home-ownership assistance programs are equally beneficial as the private home loans. Sometimes, aspiring homeowners just stick to the private loan options but that can be a big mistake. There are plenty of government home loan programs which are designed and developed by the government to provide financial assistance to the people who cannot purchase a house due to their lack of financial capability or a poor credit history. In fact, these are far more beneficial and easy to access owing to their flexibility of credit scores, down payments, and mortgage insurance. Along with that, even the interest rates are quite cheap when it comes to the loan options brought to you by the Federal Housing Administration such as the USDA, VA, or the first time home buyer programs in Houston.
So, what are you thinking? Try not to repeat these mistakes if you are looking for a loan option with a higher debt ratio.
Joan Gallardo has been a Senior Loan Officer for 18+ years and here, he writes on 3 mistakes you can do while applying for the home loans for high debt ratios. Follow his articles to know more about the first time home buyers program in Houston.