Homeownership has been a complex thing to handle, and many people struggle to get the opportunity to be a homeowner. For those who have a solid combination of good luck, good money, and good experience, there are avenues they may take to make the process simpler, one of which is getting a mortgage. But when should someone consider applying for a mortgage?
When to apply for a mortgage
Mortgages are an incredibly common approach for the majority of people buying a home in this day and age, and it’s not even close. But why is that the case? Well, simply put, buying a house is expensive. It was pricey 60 years ago, but now, with rising inflation, stagnating wages, and rising costs of houses, the idea of paying off the house all at once is nigh impossible for most. Hence, people tend to either rent, or they will accrue debt in order to get their own home. So, we have established that getting a mortgage is a common, and often necessary, path to homeownership. However, that does not simply mean that you just check off a box and have it done, especially not if you want it to be the best value possible.
First off, you need to make sure that getting this mortgage won’t ruin you financially. Homeownership is a great thing, and something that mortgage brokers Charlottesville VA will help you with, but realistically, not everyone can own a home. And it’s not because people aren’t trying hard enough; far from it, in fact. Despite the stereotypes of millennials being lazy, millennials are the most productive generation. Recently, we’ve gone through a lot of hardships that saw housing prices skyrocket and employment opportunities dwindle, most notably with the 2007 financial crisis and the 2019 Coronavirus pandemic. Ultimately, regardless of the reasons why you might not be able to afford to apply for a mortgage on your home, if you can’t, you can’t. It’s not a risk worth taking.
Determining whether you can do it will depend on multiple things. Savings plays a big part, obviously, but potential earnings are just as important, if not more so. If you’re taking out a mortgage, it means that you either do not have the funds to pay off the cost of the house right away, or you at least would be struggling if you did. Having the confidence that you will be able to accumulate the necessary funding to cover your debt. Having a rich employment history will also help with this, as the level of experience will reflect well if you need to get a new job.
Getting your credit score under control
The next thing you need to figure out is your credit score. You are taking out a loan after all, so whoever gives you that loan is going to need to have some level of confidence that you will be able to pay them back, of which a credit score is a good measure. If your credit score is too low, you run the risk of having your mortgage application denied altogether. However, for people who have either very good or excellent credit scores, they are not only more likely to get approved, but more likely to get approved for a lower mortgage rate to boot.
Eligibility is typically determined based on the applicant’s FICO score, which is pulled from each of the three credit reporting agencies. The score ranges from 350 to 850, and the higher you are, the better your odds are going to be. Aim for at least 740; if you hit 800 or more, that’s even better. If your FICO score is below 580, however, that poses a serious risk of your application being denied. If you have a low credit score, there are things you can do to fix your credit score.
For one, your credit score may fluctuate from month to month, so if you’re only a little lower than you’d like, be sure to check again in a month. Yet, some things require proactive measures, such as paying off any debts you may have. In addition, it’s important that you keep your credit card usage low, and that you don’t spend more money than you are able to pay off in a short amount of time. You can also get limits implemented for your credit card, such that you literally cannot overuse it without removing the limit.
Timing is everything
In early 2022, mortgage rates rose to 3.64 percent. Whether it will go up or down from this point on will depend on a lot of factors, some of which are harder to predict than others. The point is, whether it is actually a good time to get a mortgage for your home is going to ultimately come down to timing. Don’t feel like you need to rush into owning a home, as this is often the most disastrous thing a homeowner can do if they can’t pay off their home right away without hurting for money as a result.