Denver Realtor

Every Home Deserves a KILTED Closing

  • Buy
    • Search for Homes
    • Mortgage Interest Rates and Mortgage Payment Calculator
    • Renting vs. Buying
    • Relocation
    • Rent-To-Own
    • My Listings
    • Resources for Buyers
  • Sell
    • Request Home Valuation
    • Resources for Sellers
    • Divorce and Selling Your House
  • Rent
  • Invest
    • Rental Rate Analysis
  • Communities
    • Denver Neighborhoods
    • Search Denver Homes
    • Search Arvada Homes
    • Search Aurora Homes
    • Search Broomfield Homes
    • Search Centennial Homes
    • Search Englewood Homes
    • Search Greenwood Village Homes
    • Search Highlands Ranch Homes
    • Search Lakewood Homes
    • Search Littleton Homes
    • Search Lone Tree Homes
    • Search Parker Homes
    • Search Westminster Homes
    • Search Wheat Ridge Homes
    • Salida Real Estate
  • Blog
    • Buying a Home
    • Selling a Home
    • Real Estate Market
    • Denver Housing Market
    • Financing a Home
    • Real Estate Investing
    • Renting
    • Homeownership
  • About
    • Kilted Closings (photos)
    • Why Choose Scott
    • Client Testimonials/Reviews
    • eXp Realty Colorado
  • Contact
    • Join eXp Realty
You are here: Home / Buying a Home / Obtaining a Mortgage Amid Financial Difficulties

Obtaining a Mortgage Amid Financial Difficulties

March 28, 2022

It’s no secret that the housing market is hot right now. Demand is high and supply is low, leading to high prices for home buyers. However, in the long term, it’s overwhelmingly a smart financial decision to buy a home as opposed to renting an apartment. Still, individuals sometimes choose to rent because there are certain financial barriers to homeownership, so it can be the easier decision. If you’re looking to make the jump from renter to owner or even upgrading into a new space, but you’re faced with debt, a bad credit score, or just a lack of financial literacy, there are still ways you can overcome this and become a homeowner. It might take some time and education on the home buying process, but it’s an option should you decide to take that step.

Determining your Budget

One of the first steps when looking for a home is to determine your budget. If you’re already in debt, decide how much more you can feasibly take on to meet your mortgage. To do this, your mortgage lender will calculate your debt to income ratio, or your monthly debt payments divided by your monthly gross income. They’ll then evaluate your desired mortgage term, commonly 15 or 30 years, your monthly budget, how much savings you have for a down payment, and factor in other homeowner expenses (such as insurance and fees) to determine how much house you can afford. The lower the debt to income ratio, the more loan options you’ll have available to you, but most lenders won’t approve anything above 50%.

Similar to knowing what you can afford is the mortgage pre-approval process. Most home buyers should and will become pre-approved for a specific rate before making an offer on a home. From there you will be able to choose if you want to go on looking for homes or to tackle some of your financial issues to secure better terms for your mortgage and afford more. Among these factors, there are also others to consider, like current home prices, interest rates, and wages that will also impact affordability.

Credit Score

A credit score is a major factor in purchasing a home and securing a mortgage because it’s a good indicator of your ability to pay your mortgage on time. Generally, you need at least a score of 620 to secure a conventional loan, but you could go as low as 500 with a 10% down FHA loan. Conventional loans are usually preferred by homebuyers because they have the most competitive interest rates and flexible repayment periods ranging from 8 to 30 years. However, if your credit score is struggling, a government-insured loan like a VA loan or FHA loan is a great way to still purchase a home.

Should you have a weak credit score, you can choose to purchase a home with a government-insured loan and aim to refinance later with a stronger credit score. Or, you can work on building good credit now and purchase a home at a later date. To determine your credit score, evaluators look at your length of history, your types of credit, your payment history, and the amount owed. If you have a weak credit score, it’s possible to raise it, but be wary of advertisements for quick fixes because they’re likely scams. One of the most tried and true ways to raise your score is to pay your bill in full when it is due, compared to the minimum payment. Another is to pay off any outstanding credit card debt you have. Finally, you can become an

authorized signer on someone’s credit that has a good credit score, that way you can benefit from their length of credit and payment history without access to a credit card. This is a great way to build credit if you have no experience with it yet.

Debt Consolidation

If your debt to income is high enough that it impedes your ability to secure a mortgage, working on paying down your debt and consolidating it should be a priority. You will need to look closely at what your debts are and the interests on them to create the best plan for paying them completely off or just down enough that your debt to income ratio drops below 50%. One of the ways you can do this is by consolidating your debt into one payment. Look into taking out a low-interest personal loan to pay off any existing debt you have, such as credit card debt, a car payment, student loans, and medical debt. This way, instead of making several payments a month, you’re only making one. You should also try to look for lower interest rates than what your existing loans carry. That way you are paying less overtime comparatively and actively working to lower your debt to income ratio.

Alternatives

If you’re facing financial difficulties, there are still some ways you can secure a mortgage without making immediate changes to your portfolio. One of those options is a co-signer. If you have a partner or parent who is willing to co-sign the mortgage with you, this could help you move into a qualified threshold to receive the mortgage. This would allow you better terms while being able to work on paying down your debts or boosting a credit score. However, this could be a significant risk for the co-signer should you not be able to pay off your mortgage or meet your payment obligations. Make sure this is a person you have a good relationship with and come up with terms of payment that’ll not jeopardize your relationship.

After evaluating all your options, you can decide if now is the right time to purchase a home, or if you have some work to do on your finances before you can get there. Many first-time homebuyers are unaware of the many qualifications it takes to get a mortgage, let alone one with competitive terms. If this is you, there are resources available to help you set and reach your financial goals, like literacy centers and financial empowerment centers. Navigating the housing market can be tough, but working with a trusted REALTOR® will help you now or when you’re ready to purchase.

SHARE THIS:

  • Email
  • Print
  • Pocket
  • Facebook
  • Twitter
  • LinkedIn
  • More
  • Reddit
  • Tumblr
  • Pinterest
  • Telegram
  • WhatsApp
  • Skype

Related

Topic: Buying a Home, Financing a Home, News Tagged With: Buy vs Rent Home, down payment, First-Time Homebuyers, Mortgage, Mortgage Loan, saving to buy a home

SUBSCRIBE: Receive a Weekly Digest of This Blog in Your Email Inbox

/ ( mm / dd )
(No SPAM. Just good content. Safe unsubscribe anytime.)

DENVER REAL ESTATE & HOUSING BLOG

scott rodgers realtor blogHi, I'm Scott Rodgers, a native of Denver and a professional Realtor serving the metro Denver metro area. In short, I help people buy and sell homes, and have built a bit of a reputation wearing a kilt to my clients' closings.

Follow this daily blog on the Denver housing market and real estate related topics for highly relevant information for home buyers and sellers.

And should you or someone you know be in the market to buy or sell a home, please reach out to me to discuss what you are looking to do. I adapt to all my clients' needs and strive to provide you with The Peak Results.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Find Your Next Home


Create Your Free Account
Get instant access to new inventory. Save searches and receive email alerts on new homes, price reductions, and status changes.
OR
Facebook
Google
Have an account?
Sign in

❖ Certified Luxury Home Marketing Specialist Designation Awarded 2023
❖ Million Dollar Guild Awarded 2023
Luxury Award 2023 - CHLMS Guild

Nextdoor.com Favorite Agent Cory-Merrill Denver

FIVE STAR PROFESSIONAL AGENT 2022 Scott Rodgers

Scott Rodgers 2021 Top Agent Award

Denver Real Estate Blog

  • You May Not Need as Much as You Think for Your Down Payment [INFOGRAPHIC] February 3, 2023
  • Experts Forecast a Turnaround in the Housing Market in 2023 February 2, 2023
  • Should You Rent Your House or Sell It? February 1, 2023
  • Lower Mortgage Rates Are Bringing Buyers Back to the Market January 31, 2023
  • Where Will You Go If You Sell? You Have Options. January 30, 2023
  • Homeownership Boosts Your Net Worth Through Equity [INFOGRAPHIC] January 27, 2023
  • REcolorado MLS Ranks Scott Rodgers 2022 Top-40 Agent by Residential Sales, Top-5 for Denver County. January 26, 2023
  • Moving Now May Be A Better Option Than This Spring January 26, 2023
  • Why You Shouldn’t Fear Today’s Foreclosure Headlines January 25, 2023
  • The 3 Factors That Affect Home Affordability January 24, 2023

Search Homes on Your Mobile

Visit www.ThePeak.com from your mobile phone and click the button below to search the MLS for homes with the best mobile user experience: fast, accurate, and easy to use.
Download App

Giving Back

Join my team on Kiva.org and help communities grow and prosper at the most foundational level: the individual, the family, the local business. It’s our way of spreading goodwill around the world. Participating is easy and involves small $25 loans.

  • Loans: 350+
  • Total Lent: $9,000+
  • Countries: 61+

Scott Rodgers

Real Estate Broker, REALTOR®, MRP
Bungalow Living Brokerage Inc
303-242-8831 (m)

Welcome to The Peak Home Source at ThePeak.com

  • Email
  • Facebook
  • Instagram
  • LinkedIn
  • Twitter
  • YouTube
the peak home source with scott rodgers - denver

Why Choose Scott Rodgers as your Realtor »     Write a Review / Recommend Scott »

18,700
Search homes in Denver, Centennial, Littleton, Lakewood, Englewood, Greenwood Village, Aurora, Lone Tree, Highlands Ranch, Parker, Wheat Ridge, Arvada, Westminster, Broomfield.
Copyright© 2016–2023 · The Peak Home Source with Scott Rodgers · Denver Realtor · MLS · Buy · Sell · Rent · Denver Real Estate Blog · Privacy · ToS

Marketing efforts are not intended to solicit properties listed under written agreement with licensed real estate brokers.
Website content is for informational purposes only. For professional advice or service, engage a licensed real estate broker, loan originator, attorney, or CPA under written contract.
Part of the real estate listing content on this website comes from the IDX program of REcolorado.

Go to mobile version