You’ve made the decision that you’re going to buy a home; what’s next?

The home buying process may be a bit daunting, but the more you prepare, the more confident you will be with your purchase. Our mortgage specialists at Cleveland State Bank provided some tips for you to best qualify for a home loan. 

1. Create Your Needs vs. Wants List 

Owning a home in the city versus owning a home in a neighboring town or village comes with different price tags. It also comes with many different criteria that should be taken into consideration when deciding to buy a home. Create a “needs and wants” list of what is important to you and your future home. Include things that are important to you in the immediate future and down the road, like school districts and proximity to work.1 

2. Determine Your Financial Base 

Once you have your list of “needs and wants,” determine your financial base. Determining how much you can afford will help you decide when you can move, where you can afford to live, and the type of home you can afford to purchase. Even before looking for a home, determine where your money is ebbing and flowing. Begin by determining how total income you (and a partner) have each month.2 

Next, determine how much you’re spending monthly. What type of expenses do you currently pay for every month? Include insurance, memberships, utilities, car payments, and any other daily living expenses 

you may have. Realistically, you should determine how much you can afford on monthly mortgage payments, property insurance, and taxes. 

3. Use Tools Provided to You 

Once you know how much you can afford, it’s best to use online tools to help you determine what kind of mortgage or home loan that would translate to. Calculators, like Cleveland State Bank’s Mortgage Qualifier Calculator, can show you how much you can realistically borrow based on your income, purchase price, or total monthly payment. 

4. Save for a Down Payment 

Saving up enough to buy a home can feel like a huge task. But a solid saving plan can help you get there. There are several simple strategies you can use to make saving for a home a little easier, including creating a clear savings goal and reducing or cutting out any habits with financially savvy alternatives.4 For instance, do you go out to eat every week? What if you chose to cook at home instead? Do you normally buy brand-name items? What if you chose generic? Or what if you chose to make coffee at home instead of going to the café every morning? 

5. Credit 

When it comes to determining your mortgage rate, your credit score is a critical factor. Your credit score tells the bank how likely you are to pay your mortgage bill, even if your financial situation changes. Typically, you can purchase a home with a score in the mid-600s. However, a score that falls in the mid-700s or more will get you the lowest interest rates. 

Review your credit reports and most current credit score from online sources. In addition to simply knowing what your credit score is, this will also help keep track of any inaccuracies that can affect your score. Credit scores are determined by payment history, credit usage, the age of your credit accounts, what kind of credit you have, and any hard credit inquiries.5 To help satisfy how your credit score is determined, keep your debt-to-credit ratio low and make sure you’re paying your bills on time. 

Bonus Tip – Contact Cleveland State Bank

There is a lot to consider when getting ready to buy a house and applying for a home loan. The beauty of qualifying for a mortgage is that you don’t have to do it alone. Our mortgage specialists at our Elkhart Lake, Cleveland, and Howards Grove offices are ready to answer your questions and help you with your lending needs. Whether you’re ready to buy, build, or refinance, our professionals are here to show you we care about your dream. 

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