6 Tips For Buying A House With Low Income

Here are some things that can help you as you work towards your homeownership goals.

1. Work On Your Credit Score

Having a good or excellent credit score can help boost your mortgage approval odds. If your current score isn’t the best, you can work to improve it by making on-time payments, paying down debt if you’re able to and keeping your credit utilization (the amount of credit you use compared to your total credit limit) as low as possible.

The credit score you’ll need to buy a house will vary depending on the type of loan you get. Conventional loans typically require a score of at least 620, while FHA loans often require at least 580.

Increasing your credit score can help you save money on your mortgage, as those with higher scores tend to be offered better interest rates.

2. Outline A Budget

Knowing exactly how much you can afford to spend each month on housing will help prevent you from taking on a larger mortgage than what you can comfortably handle.

When planning this out, keep in mind any additional costs you might have as a homeowner that you don’t currently have to factor into your budget. Repairs and regular maintenance can quickly add up; be sure to include those potential costs in your monthly homeownership budget as well.

3. Save For A Down Payment And Closing Costs

Unless you qualify for a no money down mortgage option, you’ll have to figure out how much you’ll need to save for your down payment.

If you’re able to qualify for a loan with a low-down payment option, you may be able to put down just 3.5% or 3%. On a $200,000 home, this equals a down payment of $7,000 or $6,000, respectively.

However, you’ll also need to save some additional money to cover your closing costs. Plus, you’ll typically be required to have a certain amount of money in your savings as reserves, so that your mortgage lender knows you’ll be able to cover your mortgage payments if you were to temporarily lose your source of income.

Determine how much you’ll need for all your home buying-related costs, and then create a plan for how you’ll save for it.

4. Use A Co-Signer

In some cases, it’s possible to have someone else co-sign your mortgage loan. In these situations, the co-signer’s financial and credit information will be considered in addition to yours in determining whether you’ll be approved for a mortgage.

However, this also means that your co-signer is on the hook if you’re unable to make your monthly payments. Be sure to talk with your co-signer about expectations and what you’ll do if you’re having trouble meeting your mortgage obligation.

5. Consider First-Time Home Buyer Programs

If you’re a first-time home buyer, there are a variety of programs at the national, state and local level available to help you get into a home. Read up on some of the programs, loans and grants that are especially helpful to first-time buyers.

6. Pay Off Debt

If you can decrease the total amount of debt you owe, you’ll lower your DTI, which can help your mortgage approval odds and boost your buying power.

Obviously, this is easier said than done. You might look into consolidating all your debt into a lower-interest loan and using the money you’re saving on interest each month to pay off more of your debt.

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