3 Tips for Preparing to Buy a Home

June is National Homeownership Month, so it’s a great time to take a look at three important goals to hit before you buy. 

Build Up Your Savings    

Having savings (“assets”) on hand will help you qualify for a mortgage and provide funds for the down payment and closing costs. Remember to hold off on large purchases, cancel streaming services you don’t use, and cut back on eating out and fancy coffee shops. 

And FYI, you don’t actually need that mythical 20% down payment. The minimum required down payment percentage is as follows: 

• Conventional: For some first-time borrowers, the requirement is as little as 3%. The standard requirement is 5%, but if you can put down 20% or more, you’ll avoid private mortgage insurance (PMI). 

• FHA: Only 3.5% is required, and Atlantic Bay offers two FHA assistance programs – Buyer Boost and Chenoa Fund – that can provide a second mortgage to cover the down payment for 100% financing. 

• USDA and VA: There is no down payment required, but you can put money down if you like.  

Improve Your Credit Scores    

Credit scores are a vital part of loan eligibility and can help you get a better interest rate. Remember to... 

• Get in the habit of making smaller purchases every month with your credit cards, such as groceries or gas, and routinely pay them off.  

• Avoid maxing out your credit cards, missing or late payments, or closing accounts, as these actions quickly drop their credit score. 

Your Atlantic Bay Mortgage Banker will be happy to do a “soft pull” (no hit on your report) on your credit and come up with a plan to build it. Atlantic Bay offers credit rescoring, as well as our SmartPath program to help prepare you for homeownership. 

Lower Your DTI 

The debt-to-income (DTI) ratio represents how well you manage your money. Lenders look at this percentage to determine your risk in taking on another payment. Here’s how to calculate it: 

• Add up monthly bills like rent, credit cards, student loans, and alimony. Don’t include utilities, groceries, etc. 

• Divide the total by monthly gross income (before taxes). 

• The result is the DTI. A good rule-of-thumb is 43% or lower – 36% is ideal. 

To improve DTI, you should pay off as much debt as you can reasonably afford before committing to a mortgage. 

We’re excited to help you achieve a home of their own. Reach out today to get started!